Effectiveness of the Counter-Cyclical Policies

Effectiveness of the Counter-Cyclical Policies


Table of Contents

IntroductionThe Great RecessionThe Housing MarketSupply and DemandGovernment PoliciesFiscal PoliciesMonetary PoliciesConclusion


Between December 2007-June 2009 the United States experienced the Great Recession. During the worst part of the Great Recession, virtually every segment of the U.S. economy was adversely affected. Employment losses were severe, but also unevenly distributed: men, the young, and the less educated suffered disproportionately in the recession’s aftermath.

The Great Recession

Started December 2007-June 2009Global shift in the marketLargest downturn since the Great DepressionDecline in production and unemployment

Housing Market

Housing bubble Expenditures on household itemsEmployment in residential construction and housing-related industriesPrices for household items and commodities Injuries in occupations involved in building and maintaining our homes

Supply and Demand

Government involvementIncrease in demandDecrease in supply

Monetary Policies

Federal Fund RateInterest rates

Fiscal Policies

Government SpendingTax collectionsLimitations

Average Family Wealth 1995-2010

TABLE 1 Median and Average Family Wealth, Survey Years 1995–2010 (in 2010 Dollars)

YearMedianAverage*1995$ 84,000$ 307,9001998   98,100   386,7002001 106,100   487,0002004 107,200   517,1002007 126,400   584,6002010   77,300   498,800

Construction Unemployment


The Great Recession severely impacted different markets from 2007-2009The housing market, also known as the housing bubble The continued to soften, people began to lose their jobs, and the banking industry was in crisis.The government try to intervene by offering stimulus packages and lowered interest rates through the banks.Supply decreased and demand sparked, Families spent more and made less and many people in the construction industry was unemployed.


https://www.bls.gov/spotlight/2014/housing/pdf/housing.pdfhttps://www.federalreserve.gov/newsevents/speech/bernanke 0100103a.htmKatz, Lawrence, 2010. Long Term Unemployment in the Great Recession. Retrieved from https://scholar.harvard.edu/lkatz/files/long_term_unemplo yment_in_the_great_recession.pdfMcConnell, C.R., Bruce, S.L., & Flynn, S.M. (2015) Economics: Principles, problems, and policies (20th ed). Boston, MA: McGraw-Hill/Irwin