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When a country’s not doing so well and is having problems with the economy its GDP or gross domestic product level decline. You can only call it a recession when the GDP of the economy is negative and doesn’t show any real economic growth, for two or more successive quarters of a year. However, this rule doesn't always hold true. The National Bureau of Economic Research's (NBER) Business Cycle Dating Committee are the people that decides whether the economy has fallen into a recession. The NBER does not use any specific methodology for determining the start and end dates of a recession - instead it looks at a variety of economic indicators over various time periods and determines whether to declare that the economy is in a recession based on those data.

In the US, the judgment of the business-cycle dating committee of the National Bureau of Economic Research regarding the exact dating of recessions is generally accepted. The NBER has a more general framework for judging recessions:

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough.

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. Although the distinction between a recession and a depression is not clearly defined, it is often said that a decline in GDP of more than 10% constitutes a depression.[1] A devastating breakdown of an economy (essentially, a severe depression, or a hyperinflation, depending on the circumstances) is called economic colla

According to economists,[11] since 1854, the U.S.A. has encountered 32 cycles of expansions and contractions, with an average of 17 months of contraction and 38 months of expansion. However, they have been shorter and much less common in recent years. Since 1980, there have been only seven recessions (see charts to see how stocks did in these periods). The charts show the impact on stock market indices.

January-July 1980: 6 months #HYPERLINK "http://moneycentral.msn.com/investor/charts/chartdl.aspx?PT=7&showchartbt=Redraw+chart&compsyms=%24util%2Cge%2Cc&CB=1&D4=1&DD=1&D5=0&DCS=2&MA0=0&MA1=0&CP=1&C5=1&C5D=1&C6=1980&C7=7&C7D=30&C8=1980&C9=-1&CF=2&DB=1&DC=1&D7=&D6=&symbol=%24COMPX&nocookie=1&SZ=0"chart (worst quarter GDP Growth -7.8% spreadsheet)

July 1981-November 1982: 16 months #HYPERLINK "http://moneycentral.msn.com/investor/charts/chartdl.aspx?PT=7&showchartbt=Redraw+chart&compsyms=%24util%2Cge%2Cc&CB=1&D4=1&DD=1&D5=0&DCS=2&MA0=0&MA1=0&CP=1&C5=7&C5D=1&C6=1981&C7=11&C7D=30&C8=1982&C9=-1&CF=2&DB=1&DC=1&D7=&D6=&symbol=%24COMPX&nocookie=1&SZ=0"chart (worst quarter GDP Growth -6.4%)

July 1990-March 1991: 8 months #HYPERLINK "http://moneycentral.msn.com/investor/charts/chartdl.aspx?PT=7&showchartbt=Redraw+chart&compsyms=%24util%2Cge%2Cc&CB=1&D4=1&DD=1&D5=0&DCS=2&MA0=0&MA1=0&CP=1&C5=7&C5D=1&C6=1990&C7=3&C7D=30&C8=1991&C9=-1&CF=2&D7=&D6=&symbol=%24COMPX&nocookie=1&SZ=0"chart (worst quarter GDP Growth -3.0%)

March 2001-November 2001: 8 months #HYPERLINK "http://moneycentral.msn.com/investor/charts/chartdl.aspx?PT=7&showchartbt=Redraw+chart&compsyms=%24util%2Cge%2Cc&CB=1&D4=1&DD=1&D5=0&DCS=2&MA0=0&MA1=0&CP=1&C5=3&C5D=1&C6=2001&C7=11&C7D=30&C8=2001&C9=-1&CF=2&D7=&D6=&symbol=%24COMPX&nocookie=1&SZ=0"chart (worst quarter GDP Growth -1.4%)

During March 1991 to March 2001, the U.S.A. experienced the longest economic expansion - 120 months.

For the past four recessions, the NBER decision has approximately confirmed with the definition involving two consecutive quarters of decline. However the 2001 recession did not involve two consecutive quarters of decline, it was preceded by two quarters of alternating decline and weak growth.

[edit] Responding to a recession

Strategies for moving an economy out of a recession vary depending on which economic school the policymakers follow. While Keynesian economists may advocate deficit spending by the government to spark economic growth, supply-side economists may suggest tax cuts to promote business capital investment. laissez-faire economists may simply recommend the government remain "hands off" and not interfere with natural market forces.

Both government and business have responses to recessions. In the Philadelphia Business Journal, Strategic Business adviser Carter Schelling has discussed precautions businesses take to prepare for looming recession, likening it to fire drill. First, he suggests that business owners gauge customers' ability to resist recession and redesign customer offerings accordingly. He goes on to suggest they use lean principles, replace unhappy workers with those more motivated, eager and highly competitive. Also over-communicate. "Companies," he says, "get better at what they do during bad times. He calls his program the "Recession Drill."[1]

[edit] Federal Reserve response

The Federal Reserve has responded to potential slow downs by lowering the target Federal funds rate during recessions and other periods of lower growth. In fact, the Federal Reserve's lowering has even predated recent recessions[12]. The charts below show the impact on the S&P500 and short and long term interest rates.

July 13, 1990-September 4, 1992: 8.00% to 3.00% (Includes 1990-1991 recession) rate drop chart rate rise chart

February 1, 1995-November 17, 1998: 6.00 - 4.75 rate drop chart1 rate drop chart2 rate rise chart

May 16, 2000-June 25, 2003: 6.50- 1.00 (Includes 2001 recession) rate drop chart1 rate drop chart2 rate rise chart

June 29, 2006- (Mar. 18 2008): 5.25-2.25 rate drop chart

Siegel[13] points out that cuts in the Federal funds rate are now widely anticipated;