Depressed

Reviewed by Vineeth | Updated on Sep 28, 2020

Introduction:

Depressed is a condition or a state of a product, market, security, or currency delineated by low volumes, falling prices, and a reduction in the number of buyers. It generally depicts an extended period of low activity and prices. The term ‘depressed’ can also be made use of with respect to a broad economy, under which it usually points to a clear set of conditions of recession.

Understanding Depressed:

A depressed product, currency, security, or product which is recognised through a long-term or continued fall in the economic activity can be limited to a region or can go on to impact the broad economy of a country or the entire world. Depressed prices can generally be seen in markets after a period in which the prices have shot up to touch their peak and gradually fallen for an extended period of time. The reduced economic activity is extreme and lasts longer than would go on to happen at times of recession. When there is a depressed situation, prices might stay depressed for several months, if not years, based on the level to which the prices had shot up earlier, and the amount of excessive supply.

During Depression:

Generally, the conditions that lead to a depressed market are happenings around the banking sector which may lead to a financial crisis or the dramatic turnaround in the political structure of a region. A relentless depression in the market can lead to a deflation scenario.

At times of this cycle, which shows downward growth, the economic output slows down, demand reduces, and investment and consumption will plummet to record levels. A situation with a slowdown will lead to a total reduction in prices of capital assets as the producers have no choice but to go on and liquidate the inventories they hold; most people have no requirement to own.