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

What typically signals a recession?

1. Two quarters of consecutive economic growth

2. Six months or more of economic decline

3. Rising interest rates and gross domestic product

4. High consumer spending and low unemployment

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

A recession is typically signaled by a period of economic decline, specifically defined as two consecutive quarters of negative growth in a country's gross domestic product (GDP). The correct answer indicates that this economic decline lasts six months or more. This timeframe aligns with the standard economic indicators used by economists to define a recession. During a recession, key economic indicators tend to worsen, which can lead to reduced consumer confidence, lower spending, and higher unemployment rates. The significance of the six-month duration helps to distinguish between temporary economic slowdowns and a true recession, emphasizing sustained economic deterioration rather than short-term fluctuations. While other options might present factors that influence or accompany economic conditions, they do not accurately define the parameters that signal a recession. For instance, two quarters of growth would actually indicate economic expansion, rising interest rates might indicate tightening monetary policy rather than a recession, and high consumer spending coupled with low unemployment typically suggests a strong economy, not a recession.