The Economic Stimulus Act Of 2008 - 2374 Words

Phase One Introduction The Economic Stimulus Act of 2008 was intentionally supposed to re-energize the economy from a recession that occurred from 2001-2004. This paper will dive in further to explain the economic policies core provisions and the market failure it was intended to correct. 2008 Recession At the end of the recession from 2001-2004, a period that no economic growth, the Federal Reserve recommend that interest rates stay as low as possible. The idea behind this thought was that lower interest rates would attract people to investment in housing, business loans and other areas of economic growth. The idea worked, as more and more potential homeowners entered the market, brought in by the perception that they could afford to pay monthly mortgage rates. However, in 2004, the price of oil started to rise, and the Fed responded by gradually increasing interest rates (Beese, 2008). Home owners were caught off guard by the change in interest rates. Many people were already in debt from the previous recession by taking out home equity loans to keep them afloat. Many of which had now taken out subprime loans (which are loans offered to people with poor credit) from eager lenders and backed by the government. Financial institutions did little stop subprime lending, the popularity of these types of loans kept growing, and lending companies took quantity of loans over quality which added to the so called â€Å"housing bubble† (Burry, 2010). Financial institutions didn’tShow MoreRelatedImpact Of The Sub Prime Crisis1687 Words   |  7 Pagesof US housings and non-profit organizations fell, rise in the national debt percentage, decline in manufacturing and trade. †¢ The Real gross domestic product (GDP) began shrinking in the third quarter of 2008 and did not return to growth until Q1 2010. †¢ The unemployment rate rose from 5% in 2008 pre-crisis to 10% by late 2009, then steadily declined to 7.6% by March 2013 †¢ Residential private investment (mainly housing) fell from its 2006 pre-crisis peak of $800 billion, to $400 billion by mid-2009Read MoreEssay on Reagan’s Economic Policy1121 Words   |  5 Pagesdisaster. Perhaps the most significant event was the economic downturn. He came to office (much like President Obama) in the midst of an economic crisis; however, President Reagan was able to turn the economy around. How did he do this? In order to answer this question, you must first ask what the economy was like when he was sworn into office, how his policy changed from the prior administration’s policy, and how it contrasts our present economic policy. Prior to Reagan’s inauguration the countryRead MoreWhat Is The Three Fiscal Stimulus?800 Words   |  4 Pagesstimuli. The German Chancellor, Angela Merkel, pushed for a â‚ ¬23 billion over a four year stimulus in October 2008. This was agreed to in November 2008.The stimulus represented 2% of German GDP and included a variety of measures to boost demand. One of these measures was tax reduction on new cars in return for scrapping the old ones, loans to small and medium enterprises and various public works. This stimulus was faced with much criticism as there was concern that the amount offered was not sufficientRead MoreThe Great Recession Lasted From December Of 2007 Until1229 Words   |  5 PagesSchorfheide, 2014, para. 1); this was the only metric that wasn’t drastically impaired due to the recession. The last metric, interest rates, was cut to a range of between zero and .25 percent in order to attempt to stimulate the economy (Isidore, 2008, para. 1). With l ower interest rates, consumers can borrow and spend more rather than saving money, and this puts money back into the economy. Seeing that the recession took a toll on the economy, the biggest concern for many is seeing how the economyRead MoreHow Government Economic Policies Caused the Financial Crisis of 20081553 Words   |  7 Pagesfinancial crisis in 2008 that led to a crisis in the banking sector, and which nearly led to a complete collapse of the economy globally, was not only caused by changes in the regulatory, regulation and legislation oversight, but also fiscal and monetary policies. Many believe that, expansion of excesses monetary and irresponsibility of some of the government agencies led to the crisis. According to reports by Taylor (2009), excesses monetary policies were the main cause of the 2008 financial crisisRead MoreDemand Side Policies And The Great Recession1191 Words   |  5 Pages DEMAND-SIDE POLICIES AND THE GREAT RECESSION OF 2008 TIMOTHY W. AUSTIN AMU/APUS ECON102 MACROECONOMICS DR. FREDERIC BOUCHET MARCH 25, 2016 INTRODUCTION According to Investopedia, â€Å"a recession is a significant decline in activity across the economy, lasting longer than a few months.† Technically a recession is viewed and measured by evaluating and verifying negative growth in a nations’ Gross Domestic Product (GDP) for two successive quarters. A recession can be seen when there is a declineRead MoreTax Implications Of Bailout And Elections Essay1425 Words   |  6 PagesTax Consequences of Economic Failures June 13, 2007 is the day that Richard C. Cook claims in his article, â€Å"It’s Official: The Crash of the U.S. Economy Has Begun.† In the past couple of years, months, and weeks, the United States economy and stock market showed significant failures and inefficiencies to the world. Perhaps the greatest evidence signaling the recent economic meltdown is the subprime mortgage problems that started a little over a year ago. The burst of the U.S. housing marketRead MoreThe Limitations of Monetary Policy Essay1184 Words   |  5 Pagesthe current economic climate, the Obama administration’s course of action has been to pursue aggressive countercyclical fiscal policies designed to prevent further economic deterioration. Critics of these policies argue that: 1. The current fiscal stimulus is ineffective and has done little to create new jobs at a significant cost. 2. Monetary policy is a more effective lever to reduce unemployment and smooth the business cycle, due to its shorter implementation lag and ability to act in small multiplesRead MoreU.s. Economic Stimulus Package843 Words   |  4 Pages U.S. Economic Stimulus Package Jason Leitch-Williams St. Gregory’s University U.S. Economic Stimulus The Great Recession has been one of the largest fiscal crises of the current generation and the economic downturn that resulted has been recorded as the longest and most severe since the Great Depression (The Impact of the Recovery Act on Economic Growth). Although the economy has reached a stage of recovery, the effects of the recession to real GDP can be seen in business cycleRead MoreRunning Head: Great Recession 1. Great Recession5. . .884 Words   |  4 PagesRunning head: GREAT RECESSION 1 GREAT RECESSION 5 Great Recession Name Institution Great Recession There are times when a nation undergoes economic hardship for a long or short period of time. The recession is the term used by economists to define this period, it is a time when the nation?s economic GDP is low for more than two quarters consecutively (Beckworth, 2012). Recession often results in plunges in the stock market, unemployment, housing market, and a decrease in the quality