IEconomic recession of 2008 is seen to have affected not only the economy of the country but also has led to many changes in social, business life, consumptions by the people and more. Market economies are usually characterised by regular fluctuations, these are part of the regular market cycle. There is a primary phase which is called the expansion phase; then there is a recession phase and then there is a recovery phase. In the context of the expansion phase, the market economy will show enormous growth and increased employment trends. Over time the economy will move towards a turning point, this usually happens after what is called a peak. The recession phase can last for months or even more and is characterized by the decrease in employment rates or by reduced consumption, and in short lower economic movements and output. After reaching the trough point, the economy will slowly recover back to a longer term growth. In the case of the economic recession of 2008, the effects of recession were felt longer, and it was through introducing fiscal and monetary policies that the United States was able to bring the country into the recovery state. As of 2014, the US economy is seen to report a better growth as a result of its fiscal and monetary policies and it has a 4 percent increase in its GDP (Harding, 2014). The 4 percent increase supports the claims that this essay makes, that the fiscal and monetary policies that were used to simulate the US economy were working; however there are some concerns in the policies and there were challenges in implementation of the policies because of the US economy and these are brought into critical discussion too.
U.S Fiscal Policy
The US recession starting in 2008 led to a shrinking of economy, with consumer spending decreasing and housing expenditures. GDP dropped by around 3.9 percent in 2008 (Willis, 2009). With consumers exercising more caution, the economy declined even more, characterized by the lowering of wages, people dropping out of jobs and the only positive consequence was that the Government savings rate was increased. Revisions were made to the fiscal and the monetary policy in order to move the economy into a recovery period. A fiscal policy is where changes are made in the way tax policies are created and implemented and the spending of the federal Government might be contracted or increased based on whether the economy is in recession or is at deficit spending.