This question is a preparation for Chapter 5. Real GDP growth is not steady. A recession is a prolonged slowdown in economic activity. A common rule of thumb identifies a period of two or more quarters of negative real GDP growth as a recession – by convention a recession is dated as running between a peak (the last quarter of positive growth) and the trough (the last quarter of negative growth after the peak). Using the quarterly data from 1947 on and this rule of thumb, identify the recessions in the U.S. economy. Are there any periods that this rule identifies that you would exclude as recessions?

Any periods that it fails to identify that you would include? Explain your reasons. (Excel hint: Instead of looking at real GDP numbers directly, compute the first difference Yt = Yt − Yt-1. Then one need only look for groups of negative numbers. It is also possible to write more clever formulae for identifying recessions, using Excel’s = if() function.)