A period of declining national economic activity, typically with GDP falling for two consecutive quarters, is called?

• A. Recession
• B. Tight-money policy
• C. Deficit spending
• D. Easy-money policy

Answer: (A)

The main idea here is a downturn in the economy, called a recession. A recession is typically defined as a period when the economy is shrinking, often observed as GDP falling for two consecutive quarters. GDP measures the total value of goods and services produced, so two straight quarters of decline signal that overall economic activity is contracting. This downturn is usually accompanied by weaker hiring, lower output, and softer demand, though the two-quarter rule is a common shorthand rather than a strict rule used by all analysts.

The other terms describe policy actions rather than the state of the economy itself: tight-money policy aims to slow or restrain spending by restricting credit, which can contribute to slower growth; deficit spending refers to the government spending more than it collects in revenue; easy-money policy seeks to stimulate the economy by increasing the money supply. None of these define the period of decline itself.