Some of society holds responsibility on federal leadership particulary the president for a recession. They should also include the head of the Federal Reserve, or the entire administration in my opinion, since the Federal Reserve controls our money. There have been many discussions on the Great Recession and the impact it left on the United States. A recession is a decline in the business cycle that occurs when the real gross domestic product (GDP) total output of goods and services are produced by society, also characterized by an overall decrease in output, income, employment, and trade for several consecutive quarters lasting up to a year. The first time the United States had a recession was in 1789, there has been many recessions since then but the most severe one was known as the Great Recession. This recession lasted from December 2007 to June 2009 to some of society they thought it was a depression which is a severe case of a recession. Governments watched the corporate sequence thoroughly and took several steps to alleviate the economy before it reached dangerous points. Today, these stages are usually referred to as trough, upswing, peak, and recession (Riggs, 2015). I will briefly discuss interest rates, inflation, wages and consumer confidence of the Great Recession and how the polices affected our economy.
First, let’s look at why the government might lower tax rates to increase aggregate demand and fuel economic growth determined by fiscal policies spending and tax rates. The policies are a response to recessions that increases government spending towards infrastructure, education and unemployment benefits. If society has lower taxes, they will have more money to invest and spend which makes room for the higher demand. Monetary policy is passed by central banks through using the funds in an economy. The money supply influences interest rates and inflation, both of which are major determinants of employment, cost of debt and consumption levels (Hall, 2018).
As a matter of fact, inflation is an increase in prices of goods and services. The government will increase prices to affect inflation instead of lower taxes. If the government can regulate and increase taxes, they would be able to lower the amount of money that people have available to spend. The cause of inflation is when too much money is in rotation as opposed to the making of goods and services also when the source of money or output increases (Economywatch, 2010). Inflation and fiscal policy affect the level of economic activities of a country. Fiscal policy is the use of government purchases, transfer payments, and taxes to influence the level of economic activity. (Rittenberg181). The monetary policy is there to make banks adjust their interest rates. During the Great Recession the direction was projected to deliver monetary incentive through lowering the term structure of interest rates, increasing inflation expectations, and reducing real interest rates.
After the Great Recession companies created more jobs and started paying higher wages years later. Data has revealed huge employment and wage increases for the job fields that increased the allowed minimum-wage and other government programs like social security, earned-income tax credit, and food stamps, which have kept millions from falling into poverty. The minimum wage law was required by the labor movement and opposition political parties long ago which continues to be opposed by some employers. The constant convenience of immigrant workers prepared to work for lower wages has delayed the introduction of labor-saving innovations which would increase labor productivity. Something must come to terms with its immigrant labor policy as it threatens economic progress and worker welfare. High goods and service prices of the minimum wage law have helped economic recovery (Chowdhury ; Sundaram, 2016).
Lastly, the consumer’s confidence of the Great Recession was the level of confidence that consumers expressed for the state of the economy through saving and spending activities. Throughout the Great Recession millions of jobs were lost, and the government did not want consumers to stop spending money because that would hurt the economy even more. Consumers had to look towards their own personal financial situations and how they would manage during hard times. When it comes down to the consumer confidence there are several factors that come into effect like house prices, unemployment, inflation and growth. A decrease in consumer confidence is a sign of economic slump.
I have explained to you that economic recession is a time frame of overall financial weakening which is normally brought on by a decline in the stock market and a rise in job losses (Amadeo, 2018). Fiscal and Monetary policies play a major role in our economy when it comes how we spend money, the polices are more like the governments guidelines and rules. During the Great Recession fiscal and monetary policies had to be aggressive in order to end the recession the government had to pass several Acts.