Question

Summarize the overall trends and outcomes from the time period of 2008-2018. Intregrate data, economic models, and historic analysis.

Defend your agreement or disagreement with the actions taken by the U.S. government during this time.

Answer 1

The time period of 2008-2018 started with the financial crisis of 2008 and US economy entered into recession. It decreased aggregate demand, and increased the unemployment rate as well as increase in the claim of unemployment benefits. By, 2009, the unemployment rate increased to the level of 9% and GDP started showing the negative growth. To counter the recession, the government followed Keynesian economic model and decided to intervene strongly in the market. The government came up with the stimulus package of over $787 Billion and also launched TARP (Troubled asset relief program). Federal Reserve proactively complemented the government efforts and applied expansionary monetary policy with FFR up to the 0% and increased money supply. It caused increased in consumption and investment spending. Sector specific programs were also launched to stimulate each sector. In the next few years, by 2014, US economy started recovering from the recession. Further, by month on month basis unemployment claims decreased and unemployment rate also came down between 4% to 5%. US GDP also started showing growth of 1.5% to 2.5%. These developments might cause inflation rate to increase, then Fed decided to slowly increase FFR by .25% on a regular policy review. Though, the FED still says that it has its full support for the economy and rates are being increased to achieve the inflation rate target of 2%. At present, unemployment rate varies between 4% to 5% that shows that economy has fully recovered.

I agree with the government policy, because government was determined, not to repeat the second great depression after the first of 1930s. It made government to strongly intervene in the market with influx of stimulus package to increase the aggregate demand of the economy. The persistent efforts and support of expansionary monetary policy, led the economy to recover and prevented the formation of second depression. So, there is an agreement with the government policy.