Canadian Securities Course (CSC) Level 1 Practice Exam

What are the three steps Stats Canada uses to describe a recession? Describe them.

1. Layoffs, negative GDP

2. Depth, Duration, Diffusion

3. Stocks rally, people spend more money

4. GDP returns to its peak

The correct answer is: Depth, Duration, Diffusion

The correct choice highlights the three key attributes that Stats Canada uses to analyze and describe a recession: Depth, Duration, and Diffusion. Depth refers to the magnitude of economic decline during a recession. It evaluates how significantly the economy contracts, looking at reductions in real GDP, employment rates, and other economic indicators. The greater the decline, the deeper the recession is considered to be. Duration addresses the length of time that the economic downturn lasts. It looks at the period between the peak economic activity and the subsequent recovery. A recession that persists for a longer time would typically be viewed as more severe or serious. Diffusion examines how widespread the recession is across various sectors of the economy. If multiple industries are affected and experiencing declines, the recession is considered to have a broader impact, as opposed to being confined to one sector. These three aspects allow economists and policymakers to assess the severity and implications of the recession accurately. The other options do not encompass the comprehensive analyses necessary for defining a recession as per Stats Canada's methodology. They focus on outcomes and trends rather than the systematic classification used for understanding the recession's characteristics.