Recessions Definitions Causality and Treatments essays

Recessions Definitions Causality and Treatments essays One of the most common economic terms, familiar even to the most ordinary consumers of business information is that of a recession.' However, the definition of a recession is more controversial than might initially be expected. A recession is not simply a period of economic contraction, as opposed to a period of economic expansion. According to the Wall Street Journal headline of November 27, 2001, entitled "It's a Boy! It's a Girl! No, It's a Recession! When Will It Officially End'" a recession is generally defined as two consecutive quarters of negative growth in real GDP or Gross Domestic Product. However, the National Bureau of Economic Research or NBER defines a recession as a widespread decline in economic activity lasting more than a few months. The NBER does not simply look at the GDP. It also looks at measures of industrial production, employment, real (inflation-adjusted) incomes minus government benefits, and real wholesale and retail sales. Of course, all of these factors affect GDP in the long run, but these factors tend to be more holistic when viewed in their totality and also have implications beyond that of a few, finite months. This enables the NBER to give a more clear projection of the U.S. economic future, rather than just According to the same article in the Wall Street Journal, the NBER said on November 23 of 2001 it was also "satisfied that the total contraction in the economy" was sufficient to merit the determination that a recession is under way." The NBER has rarely been wrong in defining an extended recession in the United States economy, perhaps because it looks at more widespread economic factors than simply GDP. What is unusual about the current economic recession, however, is that industrial production since its peak last fall has been 6 percent, while industrial production was only 4.6 percent on average over the course o...