Great Recession

Definition

The Great Recession was a severe global economic downturn that lasted from late 2007 to mid-2009, characterized by a significant decline in economic activity, high unemployment rates, and widespread financial instability. This period was marked by the collapse of major financial institutions and a dramatic fall in consumer wealth, affecting the global economy and leading to substantial governmental interventions.

5 Must Know Facts For Your Next Test

1. The Great Recession led to the highest unemployment rate in the U.S. since the Great Depression, peaking at around 10% in October 2009.
2. Housing prices plummeted during this time, resulting in millions of foreclosures and significant losses in household wealth across the country.
3. The federal government implemented various measures, including the Troubled Asset Relief Program (TARP) and stimulus packages, to stabilize the financial system and promote recovery.
4. Many economies around the world were affected, leading to a synchronized global downturn that resulted in widespread job losses and increased poverty rates.
5. The recovery from the Great Recession was slow and uneven, with many individuals and families facing long-term economic hardship even after official indicators showed growth.

Review Questions

• How did the Great Recession influence presidential leadership during its occurrence?
  • The Great Recession presented significant challenges for presidential leadership, as it required quick and decisive action to address an unfolding economic crisis. Presidents had to navigate complex political landscapes while implementing emergency measures like financial bailouts and stimulus packages. The effectiveness of their responses often shaped public perception and trust in government, highlighting how critical leadership is during times of crisis.
• In what ways did the Great Recession alter public policy approaches regarding economic regulation and oversight?
  • In response to the Great Recession, there was a notable shift toward increased regulation of the financial sector. The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted to prevent future crises by enhancing oversight of financial institutions and establishing consumer protection measures. This change reflected a broader recognition of the need for government intervention in maintaining economic stability and safeguarding against systemic risks.
• Evaluate the long-term impacts of the Great Recession on future presidential administrations and their economic policies.
  • The long-term impacts of the Great Recession have profoundly influenced subsequent presidential administrations' approaches to economic policy. Many leaders adopted more cautious fiscal strategies, focusing on debt reduction while balancing growth initiatives. The experience underscored the importance of proactive economic management and regulation, shaping debates on issues like healthcare, job creation, and social safety nets as future administrations sought to avoid repeating past mistakes and ensure a more resilient economy.

Related terms

Subprime Mortgage Crisis: A financial crisis that emerged from the collapse of the housing market in the U.S., where high-risk mortgage loans were issued to borrowers with poor credit histories.

Stimulus Package: Government initiatives aimed at stimulating economic growth through increased public spending and tax cuts during periods of economic downturn.

Financial Bailout: Government intervention to provide financial support to struggling banks or corporations to prevent their collapse and stabilize the economy.