Which term is used to describe a prolonged period of economic decline characterized by a significant decrease in demand?

The term that describes a prolonged period of economic decline, marked by a significant decrease in demand, is known as a depression. A depression is more severe and longer-lasting than a recession, typically impacting various sectors of the economy and leading to extensive job losses, business closures, and a general contraction of economic activity.

In contrast, a recession is generally understood to be a shorter-term decline, often characterized by decreasing GDP, lower demand, and higher unemployment, but it does not possess the same depth or length as a depression. While a bust can refer to a downturn in economic activity, it does not specifically capture the prolonged nature of a depression. Deflation, on the other hand, refers to a decrease in the general price level of goods and services and is a separate economic concept that can occur during periods of economic decline but does not inherently describe the extent or duration of the economic downturn itself. Thus, a depression is the most accurate term for the context provided.