Economic depression and inflation
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What is the difference between economic depression and inflation? Describe the nature of an appropriate fiscal and monetary policy in each of these situations.
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Solution Summary
The difference between economic depression and inflation and appropriate fiscal and monetary policy in each of these situations are discussed.
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A depression is a recession (decline in GDP / real output for 2 or more quarters) that lasts longer and has a larger decline in business activity. On the other hand inflation is a general rise in prices across the economy.
Thus a depression is characterized by a negative average real output growth rate while during inflation there is a rise in price levels in the economy.
Fiscal and monetary policy in ...
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