Question: Difference between an Underdeveloped Economy and Depression

Readers Question: What is the difference between depression economy and underdeveloped economy?

A depression economy suggests the economy is experiencing a deep recession, characterised by falling output and rising unemployment. An economy experiencing a recession could have a high GDP per Capita or a low GDP per capita. E.g. UK and the US have both experienced a recession in the past year.

There is a difference between the definition of a recession and depression, which you can view here: Depression and Recession definition. Basically, a depression is a much more severe recession.

In everyday use, people may interchange depression and recession. For example, people may refer to the current situation as a depression. Even though the current situation doesn’t really meet the guidelines of having a fall in GDP of more than 10%.

An underdeveloped economy is an economy characterised by

  • Low GDP per capita. Perhaps less than $2,000 a year
  • Low levels of infrastructure – education, transport and health care.
  • Low levels of human development. E.g. low levels of Literacy, low life expectancy e.t.c

There are different ways of measuring underdeveloped economies. For example, the United Nations uses

Less Developed Countries (LDCs) and Least Developed Countries (LEDCs) – These are countries with very low levels of economic indicators

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