How Much Do You Know About Recessions?

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How Much Do You Know About Recessions?

Unless you've been trapped underneath something heavy, chances are you've noticed that economic gloom and doom dominates today's headlines.

Thanks to mainstream media scaremongers, the term 'recession' was routinely being bandied about well before we were technically in a recession by the traditional definition and well before it had been "officially" declared. (But you knew that already, right?)

Okay, smarty pants, then take our quick quiz to test your current knowledge and understanding of recessions!

1. A recession is usually defined as: ___________?

1. Two or more consecutive quarters of increased gross national exports
2. Two or more consecutive quarters of negative job creation
3. Two or more consecutive quarters of increased unemployment rates
4. Two or more consecutive quarters of negative economic growth

The correct answer is "d." The standard, "textbook" definition of a recession is two consecutive quarters of decline in real (inflation-adjusted) gross domestic product or real GDP. According to the NBER, "a recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."

Source: National Bureau of Economic Research

2. Who ultimately declares when the economy is in a recession?

1. The President of the United States and the Chairman of the Federal Reserve
2. The Board of Governors of the Federal Reserve System
3. National Bureau of Economic Research
4. United States Department of the Treasury

The correct answer is "c." It is the private, nonprofit National Bureau of Economic Research who decides when a recession starts and ends. The actual dating process used by the Business Cycle Dating Committee is determined by judgment rather than a formal rule.

Source: National Bureau of Economic Research

3. What is the difference between a recession and a depression?

1. A depression is shorter in length than a recession.
2. A recession is more severe than a depression.
3. A depression is longer and more severe than a recession.
4. A recession is when my neighbor loses his job. A depression is when I lose my job.

The correct answer is "c." A commonly held, but unofficial, definition of depression is a "[deeper and prolonged recession during which the] GDP declines by more than 10 percentage points."

Source: Newsweek

Mercifully, the last depression in the U.S. took place in the 1930s. Between August 1929 to March 1933, real GDP declined by approximately 33 percent.

Source: The Library of Economics and Liberty

4. Since 1945, how many recessions have affected the United States?

1. 2
2. 3
3. 5
4. 10

The correct answer is "d." The last recession took place between March-November 2001. According to Recession.org, "the collapse of the dot-com bubble, the September 11^th attacks, and accounting scandals contributed to a relatively mild contraction in the North American economy." On average, between 1945-2001, recessions lasted for about 10 months.

Source: National Bureau of Economic Research

5. Which of the following indicators are chiefly responsible for our current economic crisis?

1. Increase in home foreclosures and unemployment
2. Increase in oil prices and stock market volatility
3. Decrease in consumer confidence and industrial production
4. Decrease in interest rates and availability of credit
5. All of the above.

Trick question! (Sorry! We couldn't help it.) The answer is "none of the above." The above are all symptoms of a troubled economy, but no single factor can be singled out as the cause of a recession.

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Elizabeth Demeo and Helen MacDermott contributed to this quiz. Elizabeth Demeo is earning an MFA in Creative Writing. She is a contributing writer at eLearners.com and GradSchools.com. Helen MacDermott is the Content Director for EducationDynamics.

We welcome all comments directed to: recession [at] elearners [dot] com.