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Great Recession Of 2008 Fiscal Policy

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Demand-side Policies and the Great Recession of 2008 Steven Hooten American Military University Macroeconomics Professor Adhikari 17 April 2016 Demand-side Policies and the Great Recession of 2008 The economic meaning of a recession is “a significant decline in activity across the economy, lasting longer than a few months” (Recession, 2016). This can include many different aspects of the economy, from “industrial production, employment, real income and wholesale-retail trade” (Recession, 2016). This economic hardship took place in the United States in 2008. Called the Great Recession, this economic crisis was a difficult one to remedy. The government took to the use of two different types of policies, fiscal and monetary, in order …show more content…

Fiscal policies are policies that have the main goal of cutting taxes as well as increasing government spending. The United States’ government implemented a great amount of fiscal policies during this hard economic time in history. One fiscal policy that was implemented during the recession is called the Troubled Asset Relief Program, or better known as TARP. TARP was passed and enacted by Congress in October of 2008 (Blinder & Zandi, 2010). Part of this fiscal policy “was used by the Treasury to inject much needed capital into the nation’s banks” (Blinder & Zandi, 2010). In the spring of 2009, another part of TARP was implemented by both the Treasury and the Federal Reserve. This aspect of TARP mandated that “the 19 largest bank holding companies [were] to conduct comprehensive stress tests . . . to determine if they had sufficient capital to withstand further adverse circumstances—and to raise more capital if necessary” (Blinder & Zandi, 2010). TARP was not the only fiscal policy to be implemented by the government during the Great Recession, …show more content…

The main goal of monetary policies is to reduce interest rates. This type of policy was actually “the main policy used during the Great Recession . . . because the fiscal policy takes too long to implement” (James, 2015). During the Great Recession, “the Fed aggressively lowered interest rates during 2008, adopting a zero-interest-rate policy by year’s end” (Blinder & Zandi, 2010). This led to the use of what is known as quantitative easing. Quantitative easing is defined as “the process of the Fed buying large amounts of existing Treasury and mortgaged bonds in the open market with the sole purpose of driving down long-term interest rates” (Miller, 2014). This was put into practice when the Fed “[purchased] Treasury bonds and Fannie Mae and Freddie Mac mortgage-backed securities (MBS) to bring down long-term interest rates” (Blinder, A. & Zandi,

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Throughout the history of The United States the government has taken various actions to address the troubling circumstances with the nation’s economy. Two actions that addressed the nation’s ever so troubling economic crisis at the time include Regan Era Tax Cuts and President Franklin D. Roosevelt’s “New Deal”. These actions were proposed to society during two time periods where American citizens were facing an immense amount of strife and despair, the two plans offered hope and a plan of relief to the economy. The New Deal during “The Great Depression” and Regan Era Tax cuts which was during a terrible recession both provided a breath of fresh air during a time period where American’s and the economy were at an ultimate crisis and standstill

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Fiscal policy Following the great recession that lasted between December 2007 and June 2009, the federal government undertook several actions to promote growth and development. The government used a fiscal stimulus package worth $787 billion and a bank bailout measure worth $700 billion. In addition, the government passed the American Recovery and Reinvestment Act of 2009 to help create and save jobs. All these measures helped in providing some form of economic relief against the effects of the recession.

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Through its tools of open market operation, the Federal Reserve manages monetary policies in the economy. To encourage investment/borrowing, the Federal Reserve lowers interest rates. To fight the impact the financial crisis in 2010, the

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In the 1930s the United States of America dealt with the Great Depression with this cause there's a reason behind the story The timing and severity of the Great Depression varied greatly from country to country. The Great Depression was long and deep in the United States Perhaps unsurprisingly, the worst recession the world economy has ever experienced has a variety of causes. financial panic and misguided government policies will depress U.S. economic output. Although the government was struggling with the Great Depression and created the New Deal programs to support people, ultimately the more significant changes were in the economy unemployment and banks would close and society a huge increase in job losses and homelessness.

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The United States economy was in disarray, suffering after the 1979 energy crisis. Due to high unemployment and inflation, many Americans had lost faith in the government and the nation as a whole. When Reagan took office in 1981, the recession and this “national malaise” were already about a year old. However, many people faulted him for America’s poor condition. Immediately, he addressed the declining economy, introducing many new policies that came to be known as “Reaganomics.”

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The Presidents during the Great Depression and Great Recession, Franklin Delano Roosevelt and Barack Obama, respectively, resorted to similar actions in order to combat the economic catastrophes. President Roosevelt brought about the New Deal which consisted of programs, economic reforms, and regulations, to alleviate the conditions of Americans. But, at the same time, it was implemented in order to increase the extent to the government’s power and influence. Steve Hanke, an applied economist at Johns Hopkins University, states that similarly, “this type of intrusive response has also followed the Great Recession, ushering in a plethora of government regulations, particularly those that affect banks and financial institutions” (Hanke). Implementing these regulations and reforms requires large spending, so another parallel drawn can be the respective increase in government spending.

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The Federal Reserve System’s future role in monetary policy is likely to remain similar to the role it has had. This is likely in part because of the eternal nature of the law that President Woodrow Wilson signed that produced the Fed. In the past, this monetary policy included influencing the accessibility and cost of money as well as credit. This allows the Fed to endorse a healthy economy. As a part of this, Congress has two main goals for the Fed to promote such an economy.

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Fiscal and monetary policies provide our government and the Federal Reserve with two powerful tools to regulate our economy (Investopedia, 2018). They are interconnected and subsequently serve as guidelines to maintain positive economic growth, aim for full employment and sustain low inflation. The Reserve Bank of Australia implements the monetary policy, which is the main macroeconomic policy in Australia used to stimulate the level of Australia’s economic growth and maintain a strong financial system. The policy is predominantly concerned with influencing the demand and supply of money and credit in the economy, primarily through the use of interest rates in order to achieve the three main government policy objectives.

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Fiscal policies improve the growth of our economy by decreasing unemployment and increasing the amount of spending in our economy. Monetary policies are set in place to manage inflation. Even though the recession was a low point for our economy, the plans that were set in place helped the U.S. get back on its feet and continue to be the great country that it is today. 1. Introduction:

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In order the help end the recession the United States government along with the Federal Reserve used Fiscal and Monetary to help prevent a worst catastrophe. Fiscal Policies During the Great Recession, there were quite a few Fiscal Policies implemented. The first policy to be implemented was the Economic Stimulus Act of 2008.

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The Federal Reserve is the only government organization that can conduct the monetary policy. Monetary policy is how central banks manage liquidity where liquidity is how much there is in money supply to create economic growth (K. Amadeo, 2017). This includes all cash, credit, checks and other mutual funds in the money market. The primary propose of this policy is to manage inflation and reduce the unemployment.

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Answer: The Great Depression led the federal government to turn to the fiscal policy in order to manage the economy correctly and end the great depression for good. (8 points) Score Describe the major shift in foreign policy under President George W. Bush and the approach President Barack Obama has taken in foreign policy, 2009-2011.

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For example, in the past, the Fed spend more than $4 trillion in various ways to buy bonds, where the first part of printing money was a success; because the amount of money was large enough, lasted a long time and prevented a terrible economic situation. In addition, rates may have lowered not helping individuals and Wall Street was pocketing most of the extra cash. In my opinion, I agree that quantitative easing has changed and instead of helping the economy will only hurt it. As stated on Business Insider: “The 9 Reasons Why Quantitative Easing Is Bad For The U.S. Economy” by Michael Synder, quantitative easing will in the long run only damage the value of the U.S. dollar, inflation will hit the already struggling U.S. consumers really hard, once an price increases spiral begins it is hard to stop, inflation is a hidden tax, more quantitative easing threatens to weaken and threaten the global financial system, the status of the dollar will become threatened, and it is going to become more expensive for the U.S. government to borrow money. With that being said, in my opinion, if quantitative easing still exists, over time, it will only hurt and harm our

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2008 was a drastic year for the U.S economy. It came with the worst Financial Crisis since the Great Depression. This problem led to many disasters over the whole country because it caused the failure of many key businesses that supported the economy which led to the Great Recession. The Great Recession began on the 2000s, and it was a period of economic decline in the world markets. This crisis began with a continuous problem because of inflation.

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