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Chapter 21: Problem 5

The National Bureau of Economic Research, a private group, is responsible for declaring when recessions begin and end in the United States. Can you think of reasons the Bureau of Economic Analysis, part of the federal government, might not want to take on this responsibility?

Short Answer

Expert verified
The Bureau of Economic Analysis might not want to take on the responsibility of declaring when recessions begin and end in the United States due to the potential of political influence which could compromise the objectivity and credibility of these declarations. A private entity like NBER is often perceived as more objective and credible.

Step by step solution

01

Understanding the roles and responsibilities of the two bureaus

The National Bureau of Economic Research (NBER) is a private entity that has the responsibility to declare when recessions begin and end in the US. On the other hand, the Bureau of Economic Analysis (BEA) is a government entity responsible for providing comprehensive economic statistics like GDP. Understand these distinct roles and responsibilities.
02

Considering the implications of political influence

One reason why the BEA might not want to take over the task of declaring recessions is to avoid potential political pressures or influences. If the government body were to play this role, it could potentially be influenced by current political trends or movements which could compromise the credibility of the declaration of recessions.
03

Considering the implications of objectivity and credibility

Another reason could be to maintain the objectivity and credibility of economic analysis. As a private entity, NBER is generally perceived as more independent and objective, enhancing its credibility in declaring economic conditions. On the contrary, any declaration made by the BEA, being a government entity, might be viewed with a certain degree of skepticism due to the potential for political influence.

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