Question

1. Does the NBER define a recession as two successive quarters in which there is negative growth in GDP? Why or why not?

2. What problem does the NBER face in using data from the Bureau of Economic Analysis of the U.S. Department of Commerce?

3. Besides GDP, what important economic data does the NBER review for its reports?

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Answer 1

1. During recession there is a negative growth in GDP because of high level of unemployment. As there is recession, people start losing their job and there is no new business venture comes up. This happens because banks and financial institutions are reluctant to offer loans to the common public to start new business. As a result there is high level of unemployment and there is a negative GDP growth rate.

2. NBER faces challenges in using data as the data collection is done in a quite traditional way and thus there is lack of authenticity in data collection. Sometimes the respondents participation is not 100% or the data is quite biased in nature.

3. NBER should review the rate of unemployment, inflation and business cycle phase as an economic data beside GDP, in order to review its reports.