Great Recession Analysis

The great recession is when a country experiences an extreme decline in economic activity for 2 or more consecutive quarters within the year. Each quarter represents 3 months out of the year. The United States experienced a Great Recession in December 2007 all the way until January 2009. There are many factors that contribute to the great recession that occurred as the years went by. During the years from the 1980s until 2007, demand in the U.S. was controlled by the fast paced growth of consumer spending invested by the extreme increases in household debts. There was an uncontrollable rise in debt. There was an outrageous amount of borrowing going on by people in American households that was generated by the innovations in mortgage lending …show more content…
The outcome in the financial terror caused the demand for new houses and consumption to collapse. With that being said, there are four main reasons to explain how the great recession occurred. In favor of managing financial wealth and in oppose to the production of goods, this step taken by the U.S. led to a reduction in growth and a more weak economy. Another issue that affected the economy in a major way is income equality. The poor spends a larger percentage of their income than the rich which reduced the demand for goods and services. These two factors led to private sector debt. With the increase in income inequality, consumers found it necessary to borrow money for purchases they made that they thought they could afford. There were also expansions that occurred when firms engaged in high rates of investments. Firms will continue to invest to add more capacity to produce more goods and services. This will increase employment and income rates, but eventually firms will not find it necessary to continue investing. The great recession affected unemployment rates, the falling of income, the rise in poverty and consumer …show more content…
which led to a reduction in growth and a more weak economy. Financialization basically means the rising popularity of market based over bank based financial systems. It indicated the pattern of a continuous profit being made occurred through many financial channels instead of trade and the production of goods. The economy was extremely driven towards the management of financial wealth instead of the production of goods; they told everyone markets were logical and efficient. Towards the end, they began to take the approach to not be involved and with deregulation of the financial industry. Deregulation is the process of reducing or removing state regulations. Over the past 30 years, it has been characterized by the deregulation of the banking system and the beginning of financial exclusion of poor and minority households into their financial