The first time you call gcd, x=54 and y=24. The y==0 test fails because y is 24, so gcd is called again with
x=54 x=24 and y= (54%24) = 6. The second call to gcd knows nothing about the x and y in the first call, so all it sees are 54 24 and 6. Here, y still is not equal to 0, so gcd is called again with x=54 x=6 and y = 54 24%6 = 0. On the third call, y==0 is true, so the function returns 54 6. Control returns back to the second call, which directly returns the result of the third call (54). Control returns to the first call, which directly returns the result of the second call. Therefore, printf prints "The gcd of 54 and 24 is 54 6."
EDIT: To the OP: I hope I didn't add too much to your confusion! I saw the line gcd(y, x%y) as gcd(x, x%y). Had I considered the meaning of gcd, I might have caught the error. Though the numbers were wrong, the rest of the post holds true.
No matter how many function arguments you have, recursive calls continue until the base condition is met (i.e. when you tell it to). If you did not include the test for y==0 in the function, you would have a case of infinite recursion. Each call has its own copies of the parameters and cannot see the values in the previous calls. When the base condition is met, the function returns all the way back up the call stack. Mechanically, it's the same as a normal function call process. a() calls b() calls c() calls d(), and when d finishes, control returns back up the callstack to a(). The only difference with recursive functions is that it's one function calling itself.
AldacronMember Since 16 Oct 1999
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