Which term signifies a significant reduction in economic activity that typically persists over a long duration?

The term that signifies a significant reduction in economic activity that typically persists over a long duration is known as depression. A depression is characterized by prolonged periods of economic downturn, marked by a substantial decline in economic activity across various sectors, widespread unemployment, decreased consumer spending, and failing businesses. Unlike a recession, which is a shorter-term decline in economic activity, a depression indicates a more severe and prolonged economic crisis.

Understanding this distinction is crucial, as depression reflects deeper systemic issues in the economy that can take years to recover from. This makes it a more severe condition than a recession, which might involve temporary slowdowns or fluctuations in growth but does not usually extend over such a long period. Other terms like stagnation refer to periods of no growth, often indicating stagnant economic conditions, while inflation pertains to rising prices rather than an overall economic decline.