Question

In determining the beginning of recessions, the NBER Business Cycle Dating Committee looks for evidence of decline in:

A. the stock market.
B. the entire economy.
C. specific sectors of the economy.
D. the rate of inflation.

Answer 1

The NBER determines the beginning of a recession not by a decline in inflation rates, but by looking at a broad range of economic indicators, such as a drop in GDP, income, employment, and sales.

Step-by-step explanation:

When determining the start of a recession, the National Bureau of Economic Research (NBER) Business Cycle Dating Committee does not primarily look for a decline in the rate of inflation. Instead, the NBER identifies a recession as a significant decline in economic activity spread across the economy, lasting more than a few months.

This is often visible in various indicators, such as real Gross Domestic Product (GDP), real income, employment, industrial production, and wholesale-retail sales.

Lower rates of inflation can be associated with recessions, due to decreased demand for goods and services and increased unemployment, but they are not the main indicator for the onset of a recession. Instead, a holistic view of economic contraction is considered, and the rate of inflation is one of the many variables that can provide an insight into the broader economic landscape being analyzed.