What is the best way to define a recession, and how does the country repair the situation?
Ethridge, Peyton Morris
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I discuss the two distinct approaches one might use in defining an economic recession based on different key economic factors. The paper will also look at the historical data of the United States during the early 2000s recession, and discuss the similarities and differences of economic factors that were seen. It argues that the United States is indeed in a recession based on both definitions. However, one method is indeed superior to the other when one is identifying the timing of the current recession. I will compare and contrast the levels of economic factors, which are used in defining a recession, between the two methods. These factors will include unemployment levels, interest rates, output, lending habits of the banking system, GNI, and the quarterly growth of GDP. Further, the paper will convey the effects of a recession on the financial markets, most importantly those of the stock market. Finally, it will show the attempts of the Federal Reserve to reverse the recent events through monetary policy, and demonstrate the acts of reversal of the government through fiscal policy. It will disclose that the U.S. government must correct the credit and financial markets before it can amend unemployment, housing crisis, and output through production, among other things.