The Recession of 1973-1975

The economy began to recover in 1983 and was surging in 1984. Unemployment and interest rates dropped, allowing more Americans to buy homes and cars (Moss & Thomas, 2013, p. 236). Inflation dropped to four percent, the lowest since the early 1970s. Americans were earning more money, and oil prices were dropping, making fuel more affordable (Moss & Thomas, 2013, p. 236). “Economic growth generated 18 million new jobs and tripled the price of stocks by 1990” (Moss & Thomas, 2013, p. 236).

First, we need to understand how the Great Recession occurred. It all started with President Ronald Reagan in the 1980s. Reagan was famous for his supply-side economic views (Amadeo 1). He used top-down economics meaning he used government intervention to give businesses tax breaks and subsidies to create economic growth. With this he also started a continuing phenomenon to deregulate Wall Street. He believed this would create vast economic growth and it did. But it created a bubble and it

In 1982, investments and banks failed leading in a recession; the worst recession since the 1930’s during the Great Depression. Unemployment skyrocketed to 11 percent as compared to the usual unemployment rate which is normally 8 percent or under. Fortunately enough, a fall in oil prices prevented the double-digit inflation rate similar to that of the late 1970’s by lowering it to 4 percent. The policies of ‘Reaganomics’, mainly centered around cutting government spending and tax cuts, are what improved and

Inflation and unemployment numbers rose simultaneously, in contrary to the Keynesian theory that the Nixon administration based their policies upon. Criticism of Keynesianism became louder as the belief of a declining US economy grew and instead, economic liberal theory associated with Friedrich von Hayek and Milton Friedman won popularity. Inevitably this led to a paradigm shift towards laissez-faire economics and the idea that “government intervention necessarily impedes growth and prosperity” (CroG, p. 89). President Jimmy Carter executed the 1978 Revenue act that lowered corporate, capital gains and individual tax. In line with neoliberal ideas, numerous sectors were deregulated. In 1981, Ronald Reagan took office and carried out reforms that built on the legacy of Carter. Comparing the Reagan administration to Carter’s, the former manifested even stronger support for neoliberal ideas (CroG, p. 89). The 1981 Economic Recovery Tax Act was inspired of the Laffer curve, a theory that lower tax rates increases government revenues and economic growth as people will increase their productivity when allowed to keep a greater part of their income. Tax levels retained progressive and were in average cut by 30 % (CroG, p. 91). Following the reforms, the U.S economy grew and income levels

Today the United States Americans more than ever; there is a constant fear of an awaiting recession due to the economy. The recession in the later 2000’s has been known as the greatest economic decline since the Great Depression. The United States of America, the banks and businesses are not able to succeed and are failing due to the market. Many people across America cannot afford their homes or bills due to the unemployment rate that seems to keep increasing. Many people blame this on the higher oil or gas prices, and the wars that the United States acts on. The recession has overall declined our economic activity in business profits, employment, and investment. This is all due to our falling market, and the rise of prices that so many Americans cannot afford.

When Reagan became president he started out in a recession. 11 percent of the work force was unemployed in fall, 1982. This recession reduced inflation significantly, but the interest rates remained high. During the next two years the economic recovery began. The unemployment came down, but thousands of factory jobs disappeared. The new jobs, which were mostly in service industries, paid less, leaving inflation low.

In Chapter 11, we learned that economists refer to recessions as periods where there is a declining real Gross Domestic Product (GDP) for at least six consecutive months. The unemployed workers were experiencing cyclical unemployment because of the fluctuating GDP. Since the government spending exceeded the received revenues they were operating with a budget deficit causing the national debt increase. Chapter 15 informed us of the tax increase imposed by President Clinton that later eliminated the budget deficit during his administration. Although there were many pros and cons with NAFTA it created a comparative advantage that generated more international trading between the U.S., Canada, and Mexico that caused expansion in these

When Reagan became president he started out in a recession. 11 percent of the work force was unemployed in fall, 1982. This recession reduced inflation significantly, but the interest rates remained high. During the next two years the economic recovery began. The unemployment came down, but thousands of factory jobs disappeared. The new jobs, which were mostly in service industries, paid less, leaving inflation low.

When Reagan took office, the economy was experiencing a double-digit inflation and high unemployment rates. Sky-high inflation during a time of slow growth and rising unemployment proved painful for the common man, who’s earnings were not suffice to fulfill its’ needs. Reagan provided with much more of a unique vision, through which he was able to lower inflation rates from 13.4% to 5.1% (parenthetical citation). It was during this time that Reagan cut tax rates and reduced government regulation in effort to increase the production of goods. For example, he removed the excessive regulations placed on the price of oil, which broke the OPEC oil cartel. Additionally, Reagan worked to increase employment rates. In fact, during his term, the unemployment rates decreased from 7.5% to 5.3% (parenthetical citation). In December of 1982, unemployment had peaked, but soon enough Reagan was able to overcome that obstacle as well. Sixteen-million new jobs were created, which led to economic growth. The steady economic

This is when the Republicans became vocal and tried to stop the New Deal. They felt it was tampering with the ebb and flow of the financial world; furthermore, they felt a business cycle was like the nature cycle, it balances itself out, and government interference was not necessary. Conservative Democrat were

Because the governments’ prevailing economic theory was based on laissez-faire economics, the government believed that recessions were self-correcting. Eventually unemployment and inflation stopped declining, but not before the U.S. lost 1/3 of it’s output and 25% of the workforce was unemployed.

A recession is full-proof sign of declined activity within the economic environment. Many economists generally define the attributes of a recession are two consecutive quarters with declining GDP. Many factors contribute to an economy's fall into a recession, but the major cause argued is inflation. As individuals or even businesses try to cut costs and spending this causes GDP to decline, unemployment rate can rise due to less spending which can be one of the combined factors when an economy falls into a recession. Inflation is the general rise in prices of goods and services over a period of time. Inflation can happen for reasons such as higher energy and production costs and that includes governmental debt.

Recession is a term that looms over any society at some point or another but what does recession mean for the economy, in short it is an economic decline. This essay will examine the meaning of recession and will discuss the fiscal and monetary policies that are used to pull economies out of recessions. The great Recession of 2008 will shed light on how these policies were successful at restoring economic growth and reducing unemployment.

Evidence of this period can be seen from the dramatic increase in GDP from 15.7 percent to 26.4 percent between 1920 and 1950 then reaching 46.5 percent in 1984 (Course-reader 26: Banting 1986b:2; Bakker 1990:429, Table 2.1 ). There was a general fear that if the economy would land in another economic crisis if reforms were not made. Even capitalist supporters believed that market could simply not survive without some degree of state intervention and regulation (Course-reader 24:Savage and Robins 1982: ix). The fall of the Keynesian (the Keynesian crisis) era was instigated by the inflation caused by the 1973 Arab oil embargo and the subsequent increase in oil prices by the Organization of Petroleum Exporting Countries (OPEC). This fall in the Keynesian era was accompanied with capital flight, decline in profits and De-industrialization in the economy.

For instance, in 1988, the U.S. was confronted with high inflation and decreased consumer spending. While prices rose quickly, the nation's people began to save their money, rather than invent it in the economy. It was President Ronald Reagan's ideas to reduce the government's involvement in the situation that helped to improve economic conditions. By cutting taxes to increase consumer spending, and by restricting the supply of money in the economy, he reduced the inflation from 13% to 4%. Instead of actively taking part in controlling all aspects of the economy, the government helped to solve the problem of inflation through limited involvement in the situation. The nation's people were still free to make their own economic decisions, and by reducing the taxes, citizens were able to spend more in the market. With more money begin invested in the economy and in individually owned business, there was also a demand for in the economy and individually owned businesses, there was also a demand for workers to produce the goods that the consumers now desired. By taking little government action, Regan stirred the economy, decreased unemployment involvement was necessary in the repairing of the country's economy, the amount of state control was limited.