Recession, Economic Trends and Impact on the Business Cycles

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RESPONSE:

1. I'm currently studying recessions and given the fact that the US has not experienced a recession since 2001, do you think another recession is on the horizon? Please explain your reasons why a recession might occur? If your feeling is that a recession might not occur please explain.

Recession is a period of general economic decline; specifically, a decline in GDP for two or more consecutive quarters (http://www.investorwords.com/4086/recession.html). So, by this definition, in order for a recession to occur, there must be a decline in GDP for two or more consecutive quarters. To date, economists argue that this is not reflected in the present United States economy.

However, this definition is not universally accepted. For example, the National Bureau of Economic Research defines a recession more ambiguously as "a significant decline in economic activity spread across the economy, lasting more than a few months." A recession may involve simultaneous declines in coincident measures of overall economic activity such as employment, investment, and corporate profits. Recessions may be associated with falling prices (deflation), or, alternatively, sharply rising prices (inflation) in a process known as stagflation. A severe or long recession is referred to as an economic depression. A devastating breakdown of an economy is called economic collapse (http://en.wikipedia.org/wiki/Recession) (see definition below as well).

Recently both the World Bank and the Federal Reserves (see http://www.investorguide.com/igu-article-313-monetary-policy-and-the-fed-introduction-to-the-federal-reserve-and-its-structure.html and http://www.investorguide.com/igu-article-1065-monetary-policy-and-the-fed-federal-reserve-exposed.html) have put money back into the economy, so there is some validity to those that argue for an impending recession.

However, not everyone agrees, as some argue that a recession is inevitable, while others do not. For example, many economists point to the housing market as the prime indicator of an economic recession lurking in the horizon. "A housing bubble (2002-2004) is characterized by rapid ...