A recession is a decline in economic growth, and a depression is a more severe recession. There are actually two definitions that are widely used to describe a recession. Many economists believe a recession is indicated by a decline in the country’s Gross Domestic Product (GDP) over two or more consecutive quarters.

The GDP represents a country’s total costs of completed goods and services during a specific period. To calculate the GDP, economists add consumer, investment, and government spending to export values minus import values. In a recession, the GDP goes down as consumers and businesses spend less on goods and services. The effects of a lowered GDP can include high unemployment, lower housing values, weak stock market, and bank and business closings.

The private organization National Bureau of Economic Research defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”

Most economists believe a recession becomes a depression when the GDP declines by 10 percent or more. Between 1929 and 1938, during the worst economic decline in history - known as the Great Depression (described by the New York Times here) - the GDP fell 30 percent. This resulted in unemployment as high as almost 25 percent in the United States, and plunged millions of Americans into poverty.

Popular images of the Great Depression were of hungry and homeless people waiting in long soup or bread lines and living in deplorable conditions. Shanty towns--in which civilians built shelter out of scrap materials and lived without proper sanitation or public services—appeared in cities across the United States.