Express Economical Policy Before and after Economic Crash 2008 (Essay Sample)
The task was to discus some of the economical policies that were in place before the 2008 global recession and whether they contributed to the recession. This sample paper in APA format, has outlined some of this policies in detail and they effect to the global economy/ financial sector.source..
Express Economical Policy Before and after Economic Crash 2008
After the great recession that occurred in late 2007 until mid-2009, most governments in the world have employed a number of actions to heal their hurt economies. Recession refers to an economic situation that creates reduced or slow growth in the economies (gross domestic product) GDP. Recessions create reduced aggregate demand and unemployment. The consequence of the great resection was felt around the globe and the developing countries being the worst hit by this situation. The influence of the recession is still momentous on the world economy. Even though the recession ended, the global market has still not achieved normalcy in its operations. This can be noted by the efforts by the different world economies into promoting and stabilizing their economic status. Different policies and plans are implemented by governments in an attempt to correct the situation whose success and failure, remain disputed. Among the correction policies implemented to rectify the situations include, the economic stimulus plans and the austerity policy. The implementation of the stimulus program in the United States in February 2009 by the congress was a step in the country's bid to recover from the great recession (Mallard, 2011).
Economic stimulus policies involve the roles that are played by the government in using financial stimulus for improving growth and slowing movement of the economy. It includes the monetary together with the fiscal policies. The monetary policy involves control of the interest rates in lending and other thresholds. While the fiscal policy encompasses the government attempt to improve money in circulation by investing in some projects and controlling taxation. Austerity involves the government reducing their spending so that they can reduce their budget deficits. It involves the government cutting down some of the privileges and payments that would otherwise be given in the economy in the bid to reduce budget deficits (Vanita, 2010).
Although different policies have been implemented, their success is still a question of fact. The slow and poor growth in the global GDP pause a question on whether the global economy is improving. The dispute between the Keynesian theory and the Orthodoxy theory stand out to be the significant questions to the economic repair. The fiscal and monetary policies borrow from the Keynesian theory that assumes that increased spending in the economy affects the output of the economy and the rate of inflation. Based on this, develops the participation of the government in increasing aggregate demand with an aim of improving the economy. The orthodoxy theory suggests the opposite, which is advocating for less interference of the government in the economy. Addressing the unemployment question, the orthodoxy theory states that on normal occasions a free market economy achieves full employment since employers make enough income that gradually accommodate more employees. Keynes’s theory suggests that the single most paths to take in achieving full employment, is by the government implementing projects that promote investment thus creating employment. Governments that are unwilling to influence directly factors of aggregate spending in order to reduce levels of unemployment may not succeed in the process of achieving economic growth. According to Keynes, the ability of an economy to grow depends on the ability to spend, and individuals cannot spend an amount that they lack or do not have thus need jobs. Creation of employment and employing more people grows the economy (Sardoni, 2011).
The multiplier effect relates to the economy’s expansion of the supply of cash in the market by the ability of lending of financial institutions. This effect relates...
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