Which of the following is the correct definition of a recession according to the NBER?

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BlackTom AI · Accepted Answer

To evaluate the NBER definition of a recession, we first consider what the organization emphasizes: a recession is a significant downturn in overall economic activity that is broad in scope and persists for a period of time longer than just a few months. 
Option 1 says a recession is a significant decline spread across the economy and is represented by at least one quarter with negative growth. While the idea of a broad decline is correct, tying it to a single negative quarter is not a requirement in the NBER framework; the emphasis is on a broader and longer-lasting deterioration, not a precise quarterly threshold. 
Option 2 states a recession involves a significant decline in economic activity spread across the economy and lasts more than a few months. This aligns with the NBER description by highlighting breadth (spread across the economy), magnitude (significant decline), and duration (more than a few months).
Option 3 claims that a recession is represented by at least two quarters with negative growth. This is a common shorthand used in public discourse, but it is not the formal NBER criterion, which does not specify a fixed number of negative quarters as the defining rule. It therefore inaccurately narrows the NBER concept.
Option 4 suggests that a recession lasts more than three months. While duration matters, the NBER criterion emphasizes that the downturn is more than a few months and occurs across the economy; limiting it to a three-month lower bound without mentioning breadth or magnitude could mischaracterize the breadth and severity that NBER considers.
In summary, while options 1, 3, and 4 touch on elements of timing or breadth, they either rely on a fixed quarterly rule or overly narrow the definition. The most faithful option to the NBER framing includes the key components of breadth, significant decline, and a duration extending beyond a few months, without prescribing a precise quarterly threshold.

ECON 13310 1 Introduction to Macroeconomic Analysis: A Data Driven Approach Final Exam

Which of the following is the correct definition of a recession according to the NBER?

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