General Question

softtop67's avatar

If a recession is two consecutive quarters of negative GDP what are we in now?

Asked by softtop67 (1256points) January 28th, 2008
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5 Answers

jrpowell's avatar

We don’t really know yet.. The “R” word is one you don’t toss around lightly in economic circles. Usually we don’t have the data to confirm a recession until it is actually over.

drive_by_dev's avatar

By the standards you described a recession is a relative negative growth rate for two consecutive quarters. To explain it in more realistic terms I will relate it to driving. Imagine you are trying to go as fast as you can in your car. You have the gas petal pressed all the way down, so you are accelerating quite fast. Then you let off the gas some, so the rate of acceleration goes down. That would be the recession, but you are probably still accelerating. Just like the simple example I gave, we know there are more factors involved. Hopefully these other factors do not impact our results to much. When they do we have to reevaluate the models used to make the determination in the first place (this is always happening in economics).
But like John said, economists are always improving their data sets. Most would say we do not have enough data to give a definite answer (maybe ever). Beyond that, you would be hard pressed to get two economists to give a real definition of what actually constitutes recession.

segdeha's avatar

@drive_by_dev, I think your analogy is a good one, but your description of it is flawed. When you let off the gas, you’re still moving, but you’re not accelerating (which means, of course, increasing your speed). A recession is negative economic growth. So, it’s precisely like when you let off the gas and you start to slow down.

With an economy the size of the United States’, there is actually very little the government can do to affect things (e.g., change interest rates). The proposed economic stimulus is meant as much to improve the public’s perception of the economy (and, therefore, to stimulate consumer spending) as it is to actually change the fundamentals of the game.

drive_by_dev's avatar

In my first response, I was intentionally vague. The indicators used to gauge economic expansion are great in number and cannot consider all factors. Growth rates are tricky things with which to deal. Due to factors in population growth we must consider rates on exponential curves. So expansion may continue; however, the rate may not be as high as one occurring previously to that point in time. Lock down a standardized formula, and then the math is doable.

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