Question

1. Go to http://www.econlib.org/library/Encl/Recessions . html and review the material on recessions.

a. What is the formal definition of a recession?

b. What are the problems with the definition?

c. What are the three Ds used by the National Bureau of Economic Research (NBER) to define a recession?

d. Review Chart 1. What trend is apparent regarding the length of recessions?

Short answer

(a) A recession is defined as a period wherein the actual gross national product declined for at least every two quarters.

(b) Statement lacks monthly dates once the recession began and concluded. Another flaw in the concept was that major economic downturns can occur even if there aren't two successive quarters of sluggish growth.

(c) The three Ds used by the National Bureau of Economic Research (NBER) to define a recession are duration, depth, and diffusion.

(d) The trend apparent regarding the length of recessions was from November 1973 to 1975 and July 1981 to November 1982.

Step-by-step solution

Part (a) Step 1: Concept Introduction.

A recession is defined as a period wherein the actual gross national product declined for at least every two quarters.

Part (a )Step 2: Explanation of solution.

A recession occurs when the real gross domestic product (GDP) falls for two years. Because the GNP fell during the third and fourth quarters of 1990, then again in the early quarter of 1991, 1990 was designated a recessionary year. As a result, a phase of crisis is defined as a drop in economic growth for further than two quarters.

Part (b) Step 3: Concept Introduction. 

A recession is defined as a period wherein the actual gross national product declined for at least every two quarters.

Part (b) Step 4: Explanation of solution.

The concept of the recession was marred by a number of issues. To begin with, this statement lacks monthly dates once the recession began and concluded. Another flaw in the concept was that major economic downturns can occur even if there aren't two successive quarters of sluggish growth.

Part (c) Step 5: Concept Introduction. 

A recession is defined as a period wherein the actual gross national product declined for at least every two quarters.

Part (c) Step 6: Explanation of solution.

The three $3$D's are duration, depth, and diffusion. Duration describes the length of the economic slowdown, depth describes the decline in real gross domestic product plus jobless rate during the recession, and dispersion describes the proportion of businesses with dropping jobs.

Part (d) Step 7: Concept Introduction.

A recession is defined as a period wherein the actual gross national product declined for at least every two quarters.

Part( d) Step 8: Explanation of solution.

During the previous 50 years, the typical downturn extended 11 years on avg. Between November 1973 to March 1975, then July 1981 to November 1982, there was a clear downward tendency.