The Business Cycle Dating Committee Essay

The Business Cycle Dating Committee Essay

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The Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) determines when the economy is in recession but a recession usually occurs when the Gross Domestic Product (GDP) drops for two consecutive quarters. (Rittenberg, Ch. 5, p. 113). There are many factors that lead to a recession. Inflation is one of the main factors that lead to a recession (Mora, n.d., para. 2). When prices increase over a long period of time it leads to inflation. The increased prices causes the consumer to spend less, businesses see profits decline and unemployment rates increase. All of these factors shift aggregate demand to the left. Consumers will make less purchases due to the higher prices. Businesses feel the economic effect of consumers spending less money on goods and services. During this time business profits decline due to the reduced consumer spending and can lead to an increase in unemployment rates. As unemployment rates increase the overall money going back into the economy decreases. All of these factors can lead to a slow economy. Recession occurs if the economy continues to slow down for a sustained period of time. When the GDP significantly declines for two consecutive quarters it can be considered as a recession or until determined by the NBER (Rittenberg, Ch 5, p. 113). A recession can turn into a depression if it is sustained for a long period of time. Government intervention through fiscal and monetary policies help recover the economy during times of a recession.

The government uses fiscal policy to give the economy a boost during times of a recession. The government helps the economy through reduced taxes and increased spending. Lowering taxes means more money for the consumer to spend ...


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...n an effort to stimulate the economy. The ARRA contained $787 billion in tax cuts and spending. According to The Editorial Board (2014), the stimulus “created or saved an average of 1.6 million jobs a year for four years” and “raised the nation’s economic output by 2 to 3 percent from 2009 to 2011” (para. 3). The Federal Reserve utilized monetary policy by lowering interest rates in 2008. According to Kirchhoff & USA Today (n.d.), the Federal Reserve lowered “interest rate to a record low range of zero to 0.25%” (para.). The reduced interest rates will make it more cost effective for consumers and businesses to borrow money. This borrowed money can be used by consumers and businesses for a variety of purchases which results in helping the economy. Fiscal and monetary policies are great tools the government can use to get the economy healthy during a recession.

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