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	14,087
2008q4	13,784	-2.15%
2009q1	13,563	-1.60%
2009q2	13,541	-0.16%
2009q3	13,595	0.40%
2009q4	13,714	0.88%
2010q1	13,838	0.90%
2010q2	13,959	0.87%

a. How many quarters of negative real GDP growth occurred during the period 2008-2010?
   

• 2

• 1

• 0

• 3

b. Which of the following is correct?
  

• There has to be at least one quarter 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.

• 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 year of negative GDP growth to qualify as a recession.

Answer 1

A. 3 quarter s

Explanation: The given table shows that negative real GDP growth rate happened in 3 consecutive periods.

B. There has to be at least two consecutive quarters of negative GDP growth to qualify as a recession.

Explanation: In order to qualify as recession, there needs to be negative growth rate in the real GDP for at least 2 consecutive quarters.