Ask The Piggy Bank: What is a Recession?
March 31, 2008 by Miranda Marquit
Filed under Finance
Here at Yielding Wealth, there has been many posts about the tax rebate, and the economy and a possible recession. And, of course, I’ve got many questions along these lines:
There is a lot of debate about whether we are in a recession, and how we can prevent a recession. I want to know: What IS a recession?
This is an excellent question! Many people are wondering this.
The definition of a recession is basically two consecutive quarters of negative GDP growth.
Of course, there is debate over that simple definition as well.
At the National Bureau of Economic Research, a committee defines a recession as the period that business activity starts to fall after reaching its peak. The recession lasts until business activity bottoms out and begins to rise again.
Either way, though, it is clear that you don’t know that you’re in a recession until you can go back and look over the data. However, some economists think we’re in the midst of a recession right now, and that when we look back, the data will show this as a period of declining GDP.
No matter whether we’re in an economic slowdown or a recession, though, it is a good idea to apply sensible personal finance practices to your situation, that way — whether economic slowdown or recession — you are prepared for the future.
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