Demand-Side Policies And The Great Recession Of 2008

             
Demand-Side Policies and the Great Recession of 2008 Student’s Name Institutional Affiliations                           Demand-Side Policies and the Great Recession of 2008                 The world economy is experiencing a period of change, with the various types, and effects of economic policy having a foremost issue in the economy. Aggregate demand and aggregate supply are the key determinants of the level of activity in an economy. For an economy to achieve macroeconomic policy aims, the government uses a range of policies such as fiscal and monetary policies. Both the fiscal and monetary policies had a great influence in the United States during the Great Recession. The implementation of the policies was of great impact to the country’s economy.              The fiscal policy involves taxation and government spending to manage the aggregate demand. The revolutionary fiscal policy focuses on increasing government spending or cutting the tax rates to enhance aggregate demand (Rich, 2013). Monetary policy, like fiscal policy, also seeks to influence aggregate demand.  Monetary policy controls the price or quantity of money either through money supply, exchange rate or interest rates. The Great Recession began in 2007 and ended in 2009. During this period, the real gross domestic product (GDP) decline led to high unemployment rates in the economy. These financial crises caused a rapid effect on the real economy, leading to a significant decrease in the gross domestic product of the country.               With a rise in financial crisis and recession in the economy, the American government was forced to implement measures to recuperate the economic growth globally. Like other countries, the U.S government passed fiscal stimulus programs such as the American Recovery and Reinvestment Act of 2009, and Economic Stimulus Act of 2008. These programs involved government spending and cutting of tax...