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A depression is a persistent and severe downturn in output and jobs where an economy operates well below its productive potential and where there can be powerful deflationary forces at work. Harvard University economist Robert Barro defines it as a decline in per-person economic output or consumption of more than 10%.

Many economic historians say the line between recession and depression is crossed when unemployment rises above 10% of the labour force and stays there for several years. It can take many years for output to recover to where it was at the peak of the economic cycle and, because unemployment tends to lag the cycle, a depression can leave a legacy of mass unemployment whose consequences can take a generation to resolve.

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