Economic

The Federal Reserve was effective/successful in its management of theGreat Recession

However, a near reoccurrence of the same situation took place in the year 2008 when worldwide. all nations had difficult economic situations (Berton 254). At about the Great Depression period, the rate of the Real Gross Domestic Product began to decline at a rate of about 6% annually, and the monthly average number of jobs lost rose to about 750,000. This stunning turn of events led to the stunning application of stringent fiscal and monetary policies by the Federal Reserve so as to curtail the spread of the effects. In responding to the unusually large size of the fiscal stimulus, the Federal Reserve noted that this was in consistency to the severe downturn and limited ability for the usage of interest rates nearing zero. At such hard economic times, the government of the USA through the Federal Reserve is expected to employ necessary economic variables and measures such as fiscal and monetary policies to try and resolve the situation. To this end, I can argue that the Federal Reserve was successful or effective in the manner in which it managed the Great Depression. The table below shows the annual GDP rates of the USA for the period 1910 to 1960 with the depression period lying between 1929 to 1939 (Robbins 569). This paper will strive to show how this is true and back up the arguments with relevant statistical inferences from the available corresponding economical indicators and data. Ideally, in this paper, I seek to reconsider the effectiveness in the use of fiscal policies in the wake of the recent economic crisis, and in particular in relation to the Greta Depression. As such, I will examine some of the economic policies that were advocated for and adopted by the Federal Reserve economists, as well as the specific policy measures that were undertaken by the Federal government of that period. By examining the labor market, I find it that it renders as inadequate, the contemporary approach of aggregate demand that has been mostly applied by economists at the Federal Reserve in solving the economic crisis. As such, the aggregate demand management approach was not effective in the period of Great depression to enhance the achievement of certain macroeconomic variables like the stabilization of the expectation of investors and investments, equitable distribution of income, and the generating and maintaining employment at full standards. In line with this, I will seek to review the consideration of the effectiveness of any alternative approaches to fiscal policy that could have been used towards managing the Great Depression. Therefore, in line with this investigation, I realized that the Federal Government’s commitment to the use of a labor intensive policies i.e. policies that directly target the demand gap in labor and not the gap in output, was more effective in the stabilization of the employment, investments as well as incomes of the nation during the Great Depression period. Fiscal activism during the Great Depression Most economists have been unequivocal and swift in support of the manner of fiscal activism that was employed during the period of the Great Depression. This has become as a surprise to most people aware of the events of the 1930s. While most economists had abandoned their faith in the effective use of fiscal policies to revive the nation’s economic conditions, I am glad that those at the Federal

Back To Top