Understanding this Economic Condition

Unless you are living in a cave over the course of the past year, you have heard and seen media reports about the possibility of a recession looming in the near future. If this is the case, you may be interested in a recession definition to better understand what is meant by a recession. Through this article you are provided with an overview of the recession definition.

From a purely technical standpoint, the recession definition is a decline in a country's gross domestic product or GDP for at least two consecutive quarters. In other words, the recession definition is associated with negative economic growth for two or even more successive quarters in any given year.

While this is the basic rule that is used at the recession definition, it is not absolute. This recession definition does not always prove true. There is an entity that is known as the National Bureau of Economic Research - Business Cycle Dating Committee that ultimately determines whether or not the economy of the United States has declined into a recession.

The NBER does not utilize a specific recession definition. It does not use a set methodology for ascertaining the beginning or the end of a recession. Rather, the NBER considers a number of economic indicators over a period of time before it will determine whether or not it is going to declare that the economy has entered into a recession.

The judgment of the NBER as far as the recession definition is concerned normally is accepted. The NBER has delineated its framework for determining whether or not there exists a recession. The NBER has stated:

"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough."

If as recession becomes particularly long, it can be referred to as an economic depression.The fact is, however, that the distinction between a recession and a depression is not necessarily all that clear. One definition attached to when a depression exists is that a depression exists when there is a declined in the gross national product or GNP of over 10%. Economic collapse is defined as a severe depression or a period of hyperinflation.

While these is some lack of clarity when it comes to the recession definition, the information that is provided to you in this article can be helpful in assist you in coming to a better understanding as to when a recession has occurred.