Running Head: Great Recession 1. Great Recession5. . .
884 Words4 Pages
Running head: GREAT RECESSION 1
GREAT RECESSION 5
There are times when a nation undergoes economic hardship for a long or short period of time. The recession is the term used by economists to define this period, it is a time when the nation?s economic GDP is low for more than two quarters consecutively (Beckworth, 2012). Recession often results in plunges in the stock market, unemployment, housing market, and a decrease in the quality of life of the citizens. The United States experienced a recession from December 2007 to June 2009 (Braude, 2013). It was the country?s greatest economic downfall for last 60 years earning the name ?The Great Recession?. During this period there…show more content… The package also included a rise in loan limits for high-cost mortgages.
A monetary policy was also implemented to fight the Great Recessions, Traditionally the monetary policy could not be implemented since the Federal Reserve has a Zero Bound Problem. This meant that the interest rates were already set at 0 by the central bank and could not be lowered any further since a negative figure would lead to a non-investment (Hetzel, 2012). The Federal reserve instead developed a monetary policy by the name Quantitative Easing to try and reduce the effects of the recession. QE was implemented by the federal reserve by buying assets, for example, they bought cooperate bonds from banks for cash in order to add more supply of money in the economy. In a normal case, the federal government would purchase the bonds from individual to increase money but during a recession the no private bonds available for purchase. Therefore, the federal government is forced to buy other assets.
The demand-side policies did not succeed in fully eliminating the severe effects of the economic decline. But there were some aspects of the economy that showed growth and there was an improvement in employment. The use of monetary and fiscal policies is usually viewed as a ?leaky bucket? since the effects can be felt by the beneficiaries, some archive the intended outcome while some are lost in the