Chapter 1, Problem 1DQ

How did the recession of 2007-2009 compare with other recessions since the Great Depression in terms of length? (LO1-3)

Summary Introduction

Introduction:

Concept name: Recession

Recession basically refers to a phase in which the country’s growth tends to decline drastically.

Recession is generally for short term. The GDP starts to fall, aligned with production decline and low consumption

Answer to Problem 1DQ

The recession of 2007-2009 was the most profound and the longest recession of all times. It continued for 18 months, which was almost twice as long as that of the previous recession of 1930 (9.5 months).

Explanation of Solution

The U.S economy faced a recession for approx. 18 months from 2007-2009. It is recorded to be the longest and the most profound recession till now. The recession is divided into two phases. The first phase began from December 2007 and ended in the first half of 2008; in this particular phase, the recession was not deep and did not affect the GDP (Gross domestic product). The recession started to deepen from September 2008 to March 2009.

The economy continued to decline slightly in mid-2009, before the expansion. This recession featured the highest decline in production, consumption by the consumers and investment and increase in unemployment.

One unique characteristic of this recession was that it was severely affected by the financial market.

U.S. financial conditions started to decline in August 2007 and became even worse in 2008.