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macro assinment.docx - U.S Recessions There have been as...

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U.S. Recessions There have been as many as 47 recessions in the United States ,oil price shocks have long been viewed as one of the major reasons for explaining U.S. recessions. For example, oil price shocks explain a 3 percent cumulative reduction in U.S. real GDP in the late 1970s and early 1980s and a 5 percent cumulative reduction during the financial crisis . It has proved difficult historically to separate the role of these two explanations of the business cycle because most recessions are preceded by higher oil prices . The latest example is the recession of 2007-09 , stress the importance of oil price increases for this economic slowdown. The oil shock impact on economic growth depends on several factors partially linked: (i) the shock size (ii) the shock’s persistence (iii) the economic dependency on oil and energy (iv) the policy-makers’ strategic decisions 1953 Recession In the United States the Recession of 1953 began in the second quarter of 1953 and lasted until the first quarter of 1954. The total recession cost roughly $56 billion. It has been described by James L. Sundquist , a staff member of the Bureau of the Budget and speech-writer for President Harry S. Truman as "relatively mild and brief Causes The expected inflation never happened, but the policy was still implemented. During this time, the Treasury also lengthened the maturity of the national debt and pursued flexible interest rate policies. Alongside these policies, the Treasury also began to do debt-refunding which only increased interest rates further and subsequently issued a low percentage bond. The Federal Reserve recognized the increasing interest rates and decided to allow more reserves to be available. This worked, but interest rates plummeted sending the US into a demand-driven recession of output and employment. GDP declined because of government spending and investment.
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