Depressions and Recessions

Depressions and Recessions 

Background and Scenario: All developed economies that have been established by more than a decade experienced The Great Recession (2007- 2009) as well as experiencing The Great Depression (1929-1939), should the nation be sovereign at that time. The Great Depression clearly showed that markets might not adjust back to normalcy after a downtown rapidly, and long term negative economic conditions could be realized. In the first five years of The Great Depression, the GDP of the United States fell by over 30% resulting in 25% unemployment in 1933. From 1931 to 1940 the United States unemployment rate was at or above 15% (our current unemployment rate is 3.6%). The more recent Great Recession was a global economic downturn that resulted in a financial market crisis causing unemployment to spike from about 4.5% to 10%. Depressions and recessions are still possible/probable and you are likely to encounter the impact within your lifetime (as well as expansions that the US has seen over the last 10 years). Discussion Points: Answer the following key points thoroughly, but succinctly. Use data other than/in addition to what has been presented in the scenario above. Pay particular attention to Chapters 10 -12 in your text to assist in completing this exercise. Outside research is required.  Name two causes that were similar for both The Great Depression and The Great Recession. Discuss if these causes could occur again in the current US economy and the possible impact. Use the AD-AS model when discussing these causes.  Select one bullet point from the five scenarios below and discuss how the event can 1) Spur a Recession in the US, 2) What could be done by the US government to avoid the scenario, and 3) what could be done by the US government to pull out of the recession caused by the event you selected. Consider the following possible economic scenarios, as if the United States is facing them in the near future: o Fed. Funds Rate (Interest Rate) goes from 2.50% (currently) to 12% (as in 1984) to overly cool a strong economy o Crude oil prices go from about 55 USD per barrel to 125 USD per barrel due to unrest in the Middle East. o The National Debt of the US Government goes from 22 trillion USD (Currently) to 35 trillion USD due to out of control federal spending. o Multiple nations have a trade war whereby significant tariffs and embargos are put in place to limit trading. This results in a dramatic slowdown of manufacturing orders in the US o The stock market crashes from the Dow currently being at about 26,000 to 18,000, over a 30% reduction.