The End of 2008 - 2009 Recession in the United States of America

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WANDILE SIHLE NZIMAKWE: 211546206
2013
To what extent monetary policy has aided in stabilizing and growing economies Attempt by the Monetary Policy to bring about to an end the Great Depression in United States and Global Economy. MONETORY ECONOMICS WRITTEN ASSIGNMENT

WANDILE SIHLE NZIMAKWE: 211546206
WANDILE SIHLE NZIMAKWE: 211546206
2013
To what extent monetary policy has aided in stabilizing and growing economies Attempt by the Monetary Policy to bring about to an end the Great Depression in United States and Global Economy. MONETORY ECONOMICS WRITTEN ASSIGNMENT

WANDILE SIHLE NZIMAKWE: 211546206

Introduction
In 2008, the United States have experienced the most devastating situation of great depression due to financial crisis ever since occurred during the WWII according to NBER – (National Bureau of Economic Research). Successful and big companies such as Bear Stearns, Lehman Brothers etc. retrenched workers by thousands, United States stock market collapsed, liquidity dried up and everybody knew the recession has landed. High unemployment rate, lower demand, less money (including credits) supply, increased mortgage defaults, high gas and food prices, lower GDP – (Gross Domestic Product) and declining economic growth, U.S. Dollar ($) weakening up, High PPI – (Producer Price Index), High CPI – (Consumer Price Index), decreased wages and salaries, high inflation rate, etc. were unravelling the U.S. economy.

From all the widely recognized implications of the recession, the higher unemployment is the famous and the meanest indicator of the recession. A month before the recession December 2007, the U.S. unemployment rate was 5.0% and it has been at or below this percentage for a long time. But when recession ended, the unemployment rate was around about 9.5% June 2009 it further peaked to 10.0% a 100% increase with 4.4% of Long-term unemployment rate around October 2009 which shows that after the monetary policy have tried to recover the economy it still had to deal with its other implications; unemployment.

The Gross Domestic Product of the United States of America
The diagram above showing the U.S. GDP also shows the implications of the recession (before, during and after the recession). Looking at the figures (%) before 2008, we can see the GDP at 0.5 then increasing drastically to 3.6, after that it didn’t show too much interest of increasing as it has declined by 0.6 to 3 and downward to 1.7 a 1.3 decrease. At the beginning of the recession GDP was 1.7 and it further declined to -1.8 a 3.5 decrease, still during the recession GDP increased to 1.3 and then it fell to -3.7. During the recession the situation was very bad as GDP declined down to -8.9 and then appreciated to -5.3 of which it was still very bad. Closer to the end of recession around October 2009 GDP was -0.3, showing a prosperous increase from -8.9 and then it further increased to 1.4 which was showing that some monetary tools have been put to place to recover the economy. As the GDP fell continuously during the recession it means the rate of growth has been decreasing as well. This could be due to expensive producer price index and it leads to high unemployment as the retrenchment takes place when lower production occurs. The aim of this paper then in to analyse to what extent monetary policy has aided in stabilizing and growing economies as indicated in the above figure. Put to simple words and reference to the diagram above the aim is to understand what monetary policy components have been used and how they have been used to result to the appreciation of the U.S. economy from 2010 and beyond. How did monetary policy bring about the change of the disaster from 2008 – 2009 to be a better situation indicated by the part that starts from 2010 to 2012 and inferring towards 2013 in the diagram above? On the 8th of October 2008, G7 finance ministers and central bank governors (The Monetary Policy Committee) announced a five-point plan on how is...
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