Future Business Leaders of America (FBLA) Securities and Investments Practice Test

What characterizes a depression in economic terms?

1. Short-term economic growth phases

2. Two quarters of economic decline

3. Six quarters or more of economic decline

4. A temporary decrease in consumer prices

The correct answer is: Six quarters or more of economic decline

A depression is characterized by a prolonged period of significant economic decline, which is typically defined as lasting six quarters or more. This involves substantial drops in economic activity across various sectors, leading to widespread unemployment, decreased consumer spending, and overall stagnation in economic growth. When considering the broader context of economic cycles, a recession is usually identified by two consecutive quarters of negative economic growth, which is shorter in duration compared to a depression. The options describing short-term growth phases and temporary decreases in consumer prices do not align with the prolonged and severe nature of a depression, which is marked by ongoing hardship in economic activities rather than brief fluctuations or recoveries.