Sunday, September 2, 2012

How Is The US Downturn Different From Prior Recessions?

There has been an ongoing debate at the Fed and elsewhere about the answer to the above questions.  Some argue that the recession and slow recovery are the result of structural problems in the economy.  In that case, there is not much that the Fed can do about the problem.  A conservative economist from the Bush administration disagrees.  He argues that this recession is much like earlier recessions.  It is caused by a lack of demand.  The major difference between this recession and others is that it was more severe.  Since we have a problem of weak demand, the Fed can use monetary policy to stimulate demand and speed up the recovery.

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