Which term refers to a decline in GDP that extends for two consecutive quarters?

The term that refers to a decline in GDP that extends for two consecutive quarters is recession. A recession is recognized as a significant drop in economic activity across the economy that lasts for a prolonged period, typically defined as two consecutive quarters of negative GDP growth. This indicates that the economy is shrinking and not performing well, which can lead to increased unemployment, a decrease in consumer spending, and overall economic hardship.

In contrast, depression represents a more severe and prolonged downturn, characterized by significant decreases in economic activity and lasting for several years, which is beyond the two-quarter benchmark of a recession. Stagnation refers to a situation where an economy experiences little or no growth, but it does not necessarily imply a decline in economic activity such as falling GDP. Recovery, on the other hand, denotes a period following a recession where the economy begins to grow again after a downturn. Thus, the correct understanding of these terms clarifies why recession is the appropriate choice for this scenario.