Economic Recovery: Sustaining U. S. Economic Growth in a Post-Crisis Economy
DIANE Publishing, Apr 1, 2011 - 18 pages
The recession that began in late 2007 was long and deep. It is likely to prove to be the worst economic contraction since the 1930s (but still much less severe than the Great Depression). The slowdown of economic activity was moderate through the first half of 2008, but at that point the weakening economy was overtaken by a major financial crisis that would exacerbate the economic weakness and accelerate the decline. Recent evidence suggests that the process of economic recovery has begun. Real gross domestic product (GDP) has been on a positive track since mid-2009. The stock market has recovered from its lows, and employment has increased moderately. On the other hand, significant economic weakness remains evident, particularly in the labor and housing markets. In the typical post-war business cycle, lower than normal growth during the recession is quickly followed by a recovery period with above normal growth. This above normal growth serves to speed up the reentry of the unemployed to the workforce. Once the economy reaches potential output (and full employment), growth returns to its normal growth path where the pace of aggregate spending advances in step with the pace of aggregate supply.
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aggregate demand aggregate spending billion Board of Governors boost budget deficits Bureau of Economic China China’s trade component of aggregate consumer spending consumption crisis and recession CRS Report dampen decline decrease demand side Depression dollar domestic spending economic activity Economic Analysis Economic Outlook economic recovery economic weakness economy’s effect fall Federal Reserve System fiscal and monetary Fiscal Policy further stimulus global home equity house prices household debt household net worth increase interest rates International Monetary Fund inventory investment spending labor level of potential long-term debt problem macroeconomic medium-term monetary policy monetary stimulus near-term offset output loss pace personal saving rate policy actions policy responses post-crisis potential output pre-crisis pre-recession growth path private spending projects quarter of 2010 real GDP rebalancing recent relative risk share of GDP sizable supply side sustained recovery trade surplus Treasury securities trillion U.S. economy U.S. net exports uncertainty unemployment rate