Government Reactions during the Great Recession - 862 Words

Monetary Policy and Fiscal Policy: Government Reactions during â€Å"The Great Recession Monetary policy and fiscal policy can greatly influence the US economy. Keynesian economics says, â€Å"A depressed economy is the result of inadequate spending. Keynesian argued that government intervention can help a depressed economy through monetary policy and fiscal policy. The idea established by Keynes was that managing the economy is a government responsibility. Monetary policy uses changes in the quantity of money to alter interest rates and in turn affect the level of overall spending. The object of monetary policy is to influence the nation’s economic performance, as measured by inflation, the employment rate and the gross domestic product, an aggregate measure of economic output. Monetary policy is controlled by the Central Bank and influences money supply. Fiscal policy uses changes in taxes and government spending to affect overall spending and stabilize the economy. The objective of fiscal policy is the governments’ typical use fiscal policy to promote strong and sustainable growth and reduce poverty. During periods of recession congress has the option to decrease taxes to give households more disposable income so they can buy more products. Therefore, lowering tax rates increases GDP. The steady growth of core inflation in late 2007 and the first half of 2008 appear to suggest that the Fed’s applied discretionary powers to avoid a tightening. In 2009 the feds needed to beShow MoreRelatedThe After World War II1671 Words   |  7 Pagesexperienced a rapid decline in economic activity comparable to that of the Great Depression. The United States’ real estate market collapsing and â€Å"large amounts of mortgage-backed securities and derivatives†¦[losing] significant value† (Investopedia, LLC.) caused this Great Recession. Three wealthy countries, Japan, Germany and the United States, each experienced a distinct reaction to the economic obstacles that arose during the 2000s and continued into the 2010s, thus the three countries respondedRead MoreFinancial Crisis After The Great Depression1229 Words   |  5 Pages2008 Financial Crisis Not since the great depression was there such a devastating economic crisis as the 2008 financial crisis. A crisis rooted from the burst of the housing bubble in the U.S. thus leading to the government being brought down, ruined economies, crumbled financial corporations and impoverish lives of numerous individuals. As reported in McClean and Nocera’s All the Devils Are Here: The Hidden History of the Financial Crisis, â€Å"the seeds of [the] financial disaster were sown more thanRead MoreGDP and Fiscal Policy Essay698 Words   |  3 PagesThe gross domestic product (GDP) is an essential component of measuring business cycles. The most universal description of a recession is two uninterrupted quarterly declines within the GDP, which is basically the totality of every good and service that a country produces (Shenk, 2008). This description may be deemed as one-dimensional due to the fact that GDP is a measurement of the national economic performance based on a sole economic statistic. By examining just one component of the economicRead MoreEffects Of The Great Recession On The United Kingdom Essay1405 Words   |  6 PagesBackground The â€Å"Great Recession† is commonly used to explain the massive economic contraction that occurred in the United States during the fourth quarter of 2007. However, the actions of the United States spanned to other nations, leaving massive effect on the global economy. One nation that took on serious financial burden during this recession was the United Kingdom. This nation first faced the effects of the Great Recession beginning in the first quarter of 2008. Overall, the initial mass effectsRead MoreJohn Maynard Keynes : The Father Of Macroeconomics1502 Words   |  7 Pageseconomy is critical for monetary growth and essential in post-war economies. (â€Å"Keynes†, 1968). He proposed that expansion of government involvement and increases in fiscal spending while expanding entitlements are important in recovering from an economic downturn. Keynes believed that free market economy can provide economy stability during recession through government intervention because of automatic provision of full employment that is readily available on basis that workers are flexible onRead MoreGreat Recession And The Great Depression906 Words   |  4 PagesGREAT ECONOMIC TIMES IN AMERICA The Great Recession and the Great Depression are the fallout of the exact same economic problems and are only different in a few respects. Each period is marked by a massive run ups in asset prices followed by a crash in the stock market and sent both debt and equity markets down. These periods are said to be the worse economic downturn in the country’s history. During the great depression, as banks failed and threatened to shut down the financial system altogetherRead MoreFinancial Crisis Of The Great Depression887 Words   |  4 Pages Great economic times in America The Great Recession and the Great Depression are the aftermath of mostly similar economic difficulties and are only different in a few respects. Each period is marked by a massive run ups in asset prices followed by a crash in the stock market and sent both debt and equity markets down. These periods are said to be the worse economic downturn in the country’s history. During the great depression, as banks failed and threatened to shut down the financial system altogetherRead MoreIntroduction. The Rising Unemployment Has Generated Challenges1381 Words   |  6 Pagesseeking employment but the employment rates are low. The increased rates of unemployment are contributed to by factors such as recession periods that adversely affects the economy. Impacts on the economy in turn affect the labor force leading to loss of employment and reducing the rates of employment opportunities in the country. The United States has experienced cases of recession periods and has caused significan t negative impacts on the communities and economic growth of the country. The prevalenceRead MoreEssay on FDR Had the Right Idea987 Words   |  4 PagesProtesters are swarming the capitol city. They are flooding the entrances and lobbies of major government buildings. Thousands have set up makeshift camps. They will not leave until they get what they want. The president is dumbfounded. He wonders how things could have gotten to this point so quickly. His military advisors are prepared to sweep out the protesters with horses and tanks. The president orders the military to act. From that moment on, whether he knows it or not, his presidencyRead MoreThe Great Recession Essay1692 Words   |  7 Pageshistory are doomed to repeat it. This quote applies to the Great Depression of 1929 and the Great Recession of 2008. There are many similarities between the two, like the causes, the actual events, and the aftermaths. Several factors led to the Great Depression, which were the fo llowing: overproduction by business and agriculture, unequal distribution of wealth, Americans buying less, and finally, the stock market crash of 1929. The Great Recession also had similar factors leading to it, like the housing