Question

Consider the information below. The students of a local college have gathered this hypothetical data on GDP for years 2008-2010. 2008-2010 Recession Year/Quarter GDP (billions of 2005 dollars) Growth rate from preceding quarter 2008q3 13,987 2008q4 13,684 -2.17% 2009q1 13,463 -1.62% 2009q2 13,441 -0.16% 2009q3 13,495 0.40% 2009q4 13,614 0.88% 2010q1 13,738 0.91% 2010q2 13,859 0.88% a. How many quarters of negative real GDP growth occurred during the period 2008-2010? 2 0 3 1 b. Which of the following is correct? There has to be at least two consecutive quarters of negative GDP growth to qualify as a recession. There has to be at least one quarter of negative GDP growth to qualify as a recession. There has to be at least one year of negative GDP growth to qualify as a recession. There has to be at least three consecutive quarters of negative GDP growth to qualify as a recession.

Answer 1

The given table shows that following quarters have the negative real GDP growth rate -

In 2008q4, the real GDP growth rate was -2.17%.

In 2009q1, the real GDP growth rate was -1.62%.

In 2009q2, the real GDP growth rate was -0.16%.

So,

It can be seen that there are 3 quarters that have negative real GDP growth during the period 2008-2010.

Hence, the correct answer is the option (c) [3].

An economy is said to be in recession when it experiences negative GDP growth for at least two consecutive quarters.

Hence, the correct answer is the option (a) [There has to be at least two consecutive quarters of negative GDP growth to qualify as a recession].