Why did the USA have a great recession during 2007 to 2009 period? Was it cause...

Why did the USA have a great recession during 2007 to 2009 period? Was it cause by the financial crisis? Briefly explain. You may use parts of your research paper to answer the question.

Expert Solution

USA had the great recession as mentioned that started due to the financial crisis. But, it was an event that led to the initiation of the chain of economic activities and recession was culminated in the US economy. It all started with the subprime lending done by the banks and financial industries to finance the real estate loans. When the real estate boom got busted, then value of real estate properties, decreased drastically and these assets were mortgaged at the banks ans financial companies. When people saw that their real estate property had no or very less value, then they refused to pay back the loans and defaulted. It brought a crisis and many institutions fell. It created job loss to many people and aggregate demand started to decrease. It led to decrease in supply by the firms and they also made laying of the workers and AD decreased further. Quickly, it spread to the whole US economy and showed its contagious effect to the other countries in EU and Asia. It brought great recession in the USA during that period and GDP growth became negative, unemployment was over 9% and inflation was way less than 2%. It was an indication that US economy is going through the recession.

Rahul Sunny answered 10 months ago

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