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Read these lines: "A decline in GDP that lasts for two consecutive quarters (each a three-month period) is called a recession. It is followed by a recovery period when economic activity once again increases." Based on the quoted lines, a downturn has lasted at least how long before it earns the name recession?
ATwo full years of falling output
BThree weeks of falling output
CSix months of falling output
DOne month of falling output
Answer & Solution
Correct answer: C. Six months of falling output
1. The quoted lines say a recession is a decline in GDP lasting two consecutive quarters.
2. They also explain that each quarter is a three-month period.
3. Two quarters of three months each add up to six months, so the decline must run at least six months.
4. Two full years would be eight quarters, far longer than the two the quoted lines require.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 1 "Understanding Economic Systems and Business", section 1.4 Macroeconomics: The Big Picture_
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