Question

Year/Quarter GDP

2019/Quarter 1 $390 billion
2019/Quarter 2 $400 billion
2019/Quarter 3 $380 billion
2019/Quarter 4 $375 billion

Given the information provided in this table, did country ABC experience a recession during 2019 (based upon the standard definition of a recession)?

O Yes, country ABC experienced a recession in 2019 since its GDP declined in three consecutive quarters.
O Yes, country ABC experienced a recession in 2019 since its GDP declined in two consecutive quarters.
O No, country ABC did not experience a recession in 2019 because its GDP did not decline four consecutive quarters.
O We cannot say whether country ABC is in a recession without knowing what its Real GDP was each quarter.

Answer 1

Country ABC did not experience a recession in 2019, as there was no decline in GDP for two consecutive quarters. Instead, GDP increased from Quarter 1 to Quarter 2 before declining in subsequent quarters.

Step-by-step explanation:

Based on the standard definition of a recession, which is typically characterized by a decline in Gross Domestic Product (GDP) for two consecutive quarters, country ABC did not experience a recession in 2019. Despite seeing its GDP decline in the later quarters of the year (Quarter 3 and Quarter 4), there was no occurrence of two consecutive quarters of decline at the start of the year; GDP increased from $390 billion in Quarter 1 to $400 billion in Quarter 2.

Moreover, the understanding of a recession does not solely rest on GDP figures. Other economic indicators such as unemployment, inflation, or interest rates also provide a comprehensive view of an economy's health and its deviations from potential GDP. For example, during the COVID-19-induced recession, despite a rapid drop in real GDP, the economy quickly bounced back, and real GDP had slightly surpassed pre-pandemic levels by Quarter 1 of 2021.