Demand-side Policies and the Great Recession of 2008

Macroeconomic analysis deals with the crucial issue of government involvement in the operation of “free
market economy.” The Keynesian model suggests that it is the responsibility of the government to help to
stabilize the economy. Stabilization policies (demand-side and supply-side policies) are undertaken by the
federal government to counteract business cycle fluctuations and prevent high rates of unemployment
and inflation. Demand side policies are government attempts to alter aggregate demand (AD) through
using fiscal (cutting taxes and increasing government spending) or monetary policy (reducing interest
rates). To shift the AD to the right, the government has to increase the government spending (the G-
component of AD) causing consumer expenditures (the C-component of AD) to increase. Alternatively,
the Federal Reserve could cut interest rates reducing the cost of borrowing thereby encouraging
consumer spending and investment borrowing. Both policies will lead to an increase in AD.
Develop an essay discussing the fiscal and the monetary policies adopted and implemented by the federal
during the Great Recession and their impacts on the U.S. economy. Complete this essay in a Microsoft
Word document, and in APA format. Note your submission will automatically be submitted through
“TurnItIn” for plagiarism review. Please note that a minimum of 1500 words for your essay is required.

Demand-side Policies and the Great Recession of 2008

What is the economic significance of recession?

A long-term slowdown in economic activity is the hallmark of an economic recession. A prolonged time of negative Gross Domestic Product (GDP) as well as increasing unemployment, declining in retail sales and declining indicators of manufacturing and income. Recessions are a normal part of the cycle of economics that describe the nation’s expanding and contracting over time. Real GDP and industrial production, as well as income, wholesale retail sales and even employment all drop in the recession. The recession is when the economy slows after having reached its highest point. The economy generally is growing in the middle between high. The frequency of recessions has been lower as they usually last for just a few months.

Recessions are short-term slowdowns in economic activity. Wholesale retail trade, real income, as well as the number of people working in manufacturing suggest that our economy may be in an economic downturn. According to the National Bureau of Economic Research (NBER) base its estimates on the latest available monthly information. While the official definition of recession is two successive quarters with negative growth of GDP, this isn’t necessarily in line with the declaration of the recession. The economies of most countries have been growing steadily through when they entered the Industrial Revolution. The performance of the major macroeconomic indicators has seen short-term fluctuations and even a decrease in the short-term, only to resume the trend of long-term growth for up to six months or years.

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