ECON 410 Final Paper

Topics: Monetary policy, Inflation, Great Depression Pages: 9 (2384 words) Published: December 6, 2014
Sierra Van Meter
#003978571
Econ 410
June 4, 2014
Written Report
So you might ask yourself, what exactly is a recession? According to the Bureau of Labor Statistics, characteristics of a recession include: a general slowdown in economic activity, a downturn in the business cycle, as well as a reduction in the amount of goods and services produced and sold. The official arbiter of U.S. recessions, the National Bureau of Economic Research, states that there has been a total of ten recessions between 1948 and 2011. The most recent financial crisis began in December of 2007, this is considered to be the worst financial disruption since the Great Depression of 1929 – 1933. Although these recessions were different in character, both crises were affected by bank failures that led to large declines in the economy. This last recession known as the Great Recession lasted from December of 2007 to June of 2009, the U.S. economy has yet to return to pre-recession economic times but it has seen an increase in economic growth.

The most widely recognized indicator of a recession is the unemployment rate. People are classified as unemployed if they do not have a job, have actively looked for work in the prior four weeks, and are currently available for work. (4, pg. 5) Just prior to December of 2007, the unemployment rate was 5.0%, but by the end of the recession in June of 2009; the unemployment rate was 9.5%. We saw during the recession the unemployment rate peak at 10.0%, this was in October of 2009. This was not the highest unemployment ever reached though. Between September 1982 and June 1983, the unemployment rate peaked at an all time high of 10.8%. Not only was the number of unemployed tremendously high, the proportion of long-term unemployed in the recent recession compared to post-recession periods is notable. The long-term unemployment rate is the number of persons employed for twenty-seven weeks or longer as a percent of the labor force. (4, pg. 5) In 2008, more than 1.2 million jobs were lost, the unemployment rate rose to 7.3% during this time. (2) Demographics play a large role in the unemployment rate as well. Historically, minorities such as African Americans as well as Latinos have had a higher rate of unemployment than that of Whites. Although these demographics were true during the Great Recession, the unemployment rates for these minorities remained below the peaks between 1982 and 1983 as well as for the rates of Whites. (11) Gender also is a factor in unemployment rates. Traditionally men’s unemployment rates were lower than women’s both during and between recessions, but since the early 1980s and throughout the Great Recession, men’s unemployment rates have been higher.

Other major indicating factors of a recession include inflation and economic growth. As for the inflation rate, this is calculated using the Consumer Price Index (CPI) that is published monthly by the Bureau of Labor Statistics. In December of 2007, when the recession began, the inflation rate was 4.1%. The highest rate of inflation came in July of 2008, when it peaked at 5.6%; the average inflation rate was 3.8% for the year. (20) This was the highest inflation rate our nation had seen in the past 23 years. After 2008 and the housing market crash, the United States was in turmoil. For the first time since 1955 we saw a negative average inflation rate of -0.4%, this came in 2009. Since then, the inflation rate has been about 2% annually, which is considered to be an appropriate rate. The final indicating factor of a recession that I am going to discuss is economic growth. Gross Domestic Product (GDP) is commonly used as an indicator of the economic health of a country, as well as to gauge a country’s living standards. It represents the market value of all goods and services produced by the economy during the period measured, including personal consumption, government purchases, private inventories, paid-in construction costs and the...

References: 1. Brad Plumer, “What is quantitative easing? And how will it help the economy?” The Washington Post, September 13, 2012, (accessed @ www.washingtonpost.com/blogs/wonkblog/wp/2012/09/13/qe3-what-is-quantitative-easing-and-will-it-help-the-economy/)
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5. Jason Delisle and Clare McCann, Issue Brief, “Federal Education Budget Update: Fiscal Year 2013 Recap and Fiscal Year 2014 Early Analysis,” April 30, 2013, New America Foundation, (accessed @www.newamerica.net)
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7. Joana Taborda, U.S. Commerce Department, Trading Economics, “United States GDP Growth Rate,” May 30, 2014, (accessed @ www.tradingeconomics.com/united-states/gdp-growth)
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9. Kimberly Amadeo, “U.S. GDP by Year,” last updated February 5, 2014, (accessed @useconomy.about.com/od/GDP-by-Year/a/US-GDP-History.htm)
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15. “Press Release: Release Date September 16, 2008,” Board of Governors of the Federal Reserve System, September 16, 2008, (accessed @ federalreserve.gov).
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