Macro Economic Analysis

Topics: Inflation, Monetary policy, Debt Pages: 2 (623 words) Published: December 8, 2012
A.Throughout American history there have been periods of financial boom and bust, economic growth and recession. The most recent recession from the third quarter 2007 to the second quarter 2009 seemed like an extraordinary period of recession. The S&P 500 shrank from about 1300 points to 666 points (50%), evaporating capital in a matter of days. However, this recessionary period was quickly turned around to economic growth again. The average post-World War II length of economic contraction has been 11.1 months, whereas the 2007 recession had a 1.62 times longer contraction period: 18 months. Similarly, expansion periods have lasted 58.4 months post-WWII, compared to the 2008 expansionary period that lasted a whopping 73 months; this data supports a 1.25 times as long period of time to recover from the most recent recession. When comparing data from pre-WWII to recent years, it appears that recovery from recessions have trended towards a longer recovery time in more recent contraction periods. B.1. g of Y= (12,701.00/13,326.00) (4/7) -1= -2.71% change in Y

2. g of E= (140,317.00/146,271.33) (4/7) -1= -2.35% change in E
3. g of u= (9.27%- 4.80%) = 4.47% increase in u
4. In comparison with the recession of 1973-1975, the recent recession was worse in magnitude. Real GDP levels decreased about 1.2 times (annually) more than that of the 1973-1975 recession. The decrease in employment was much more significant on the 2007-2009 recession than that of the past recession. A -2.35% annual decrease in employment was about 2.7 times higher than the -.87% decrease in the 1973-1975 recession. From the peak in the third quarter of 2007 to the trough in the second quarter of 2009, the unemployment rate increased by 4.47 percentage points. In comparison to the peak-to-trough quarters in the 1973-1975 recession, the recent recession unemployment rate increased about 1.3 times the 3.50 percentage points noted in the previous contraction period. C.There are many...
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