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Surname 1 Surname: Instructor’s Name: Course: Date: The Great Recession and the Nature of Economic Recovery Part 1 According to Knoop (2010), the National Bureau of Economic Research (NBER) describes a recession as two or more consecutive quarters of negative growth in the gross domestic product (GDP). A recession also refers to a substantial reduction in the economic activities across a particular geographical region, lasting for many months. The primary measures of economic activity include income, industrial production, GDP, employment, and sales of goods at the retail and wholesale levels. During a recession, all the macroeconomic indicators fall except the rate of unemployment, which increases. According to Knoop (2010), the economists from the Business Cycle Dating Committee of NBER considers the different economic indicators and determines when a reduction in economic activities happened when the recession started, and when it ended. The Severity of the Great Recession of 2008 The Great Recession started in December 2007 and ended in June 2009 making it the most prolonged recession in the United States since the Second World War. The Great Recession of 2008 was notably severe in different aspects. According to Rich (2017), the real GDP reduced by 4.3 percent from its highest level in the 4th quarter of 2007 to its trough in the 2nd quarter of 2009. Rich (2017) also reveals that the unemployment rate, which stood at 5% in December 2007 increase to more than 9.5 percent in June 2009, and reached a peak of 10% in October
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Surname 2 2009. However, the rate of unemployment in the U.S. steadily reduced to 7.3 percent by 2013 (U.S. Bureau of Labor Statistics). The sum of unemployed people in the country increased from around seven million people in 2008 pre-recession to fifteen million by 2009 (U.S. Bureau of Labor Statistics). The number then fell to twelve million by early 2013. The financial effects of the 2008 recession were also immense. Rich (2017) indicates that the home prices reduced by around 30 percent, on average, from their mid-2006 peak to mid- 2009. Rich (2017) also reveals that the S & P 500 Index declined by 57% from its peak in October 2007 to its trough in March 2009. According to Rich (2017), the net worth of the U.S. nonprofit organizations and households reduced from a peak of around $69 trillion to $55 trillion in 2009. According to Bureau of Economic Analysis (2017), the private residential investment, particularly housing declined from its 2006 pre-recession peak of approximately $800 billion to around $400 billion in 2009. Bureau of Economic Analysis (2017) also indicates that the non- residential investment, particularly the buying of capital equipment, was $1,700 billion before the recession; however, it dropped to $1,300 billion in 2010. The severity of the Great Recession of 2008 is also evident in the increase in the U.S. national debt during that period. The United States’ total national debt increased from 66 percent of the GDP in 2008 pre-recession to more than 103 percent towards the end of 2012 (FRED).
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  • Spring '16
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