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Impact of the Great Recession

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Counter Measures of The Great Recession


ECON102 I003 Macroeconomics

26 Jan 2013

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What is the economic meaning of a recession? As stated by Claessens and Kose (2009) “There is no official definition of recession, but there is general recognition that the term refers to a period of decline in economic activity” (para. 2). A sequence of events must take place in order to create a recession. The U.S. having the largest economy in the world is obviously not immune to the effects of a recession. The Great Recession is proof of this, as the support structure began to fail. The support structure of the economy is the stock market, housing market, and job markets. As each in its own way began to fail so did the U.S. economy as a whole. The U.S. government used fiscal policies to attempt to stabilize the economy. Fiscal policies include an increase government spending and at the same time reduce taxes. The objectives of the fiscal policies are used to create a boost in the economy. A decrease in taxes means an increase in personal disposable income. The increase in income will lead to an increase in private spending. The country’s consumer spending leads to an increase in aggregate demand which increases the Gross Domestic Product (GDP). The overall goal is to begin the process to stabilize the economy. As Rittenberg and Tregarthen have explained (2009) “Fiscal policy-the use of government expenditures and taxes to influence the level of economic activity is the government counterpart to monetary policy” (p. 293). Monetary policies are also designed to stabilize the economy. Monetary policies are used by the Federal Reserve or the “Feds” which run independently…...

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