Question

Which of the following statements about recessions is false?

a) A fall in real GDP for two consecutive quarters marks a recession.
b) A long and severe recession might be referred to as a depression.
c) A recession is a prolonged economic contraction.
d) A recession is usually no longer than six months.

Answer 1

The correct answer is D. A recession is usually no longer than six months.

Recession is termed as contraction of business cycle whereby we can say that there is slowdown in economic activities.

Macroeconomic indicators shows that there might be rise in the rate of unemployment, business profit, bankruptcy, capacity utilization, household income and gross domestic product.

When there is bigger spread of spending that is the time when recession occurs. Some events which may trigger to recession include external trade shock, adverse supply shock, financial crisis and bursting of economic bubble.

Answer 2

The correct answer is choice D-

It not true that a recession is usually no longer than six months. A recession van be longer than 6 months (it takes a 6 months fall in real GDP for a recession to occur), but a recession generally does not last longer than a year. Beyond a year, the situation is much severe, and is called an economic depression.