Great Recession

Definition

The Great Recession refers to the severe global economic downturn that occurred from late 2007 to mid-2009, marking the most significant financial crisis since the Great Depression. This economic event was characterized by widespread bank failures, massive job losses, and a sharp decline in consumer spending, which deeply influenced public opinion, government policy, and the ideological landscape in the U.S.

5 Must Know Facts For Your Next Test

1. The Great Recession was triggered by the collapse of the housing market and risky financial practices by banks and lenders, leading to a domino effect on global economies.
2. Unemployment rates peaked at around 10% in the U.S. during the recession, with millions losing their jobs and homes.
3. The federal government responded with significant fiscal stimulus measures, including the $787 billion American Recovery and Reinvestment Act of 2009 to revive the economy.
4. The impact of the Great Recession led to a shift in public opinion, with increased support for government intervention in the economy and skepticism towards deregulated markets.
5. Long-term effects of the Great Recession included slower economic growth, rising income inequality, and changes in political ideologies regarding economic policy.

Review Questions

• How did the Great Recession influence public attitudes toward government intervention in the economy?
  • The Great Recession significantly shifted public attitudes toward government intervention as many citizens experienced severe economic hardship. With millions losing jobs and homes, there was a growing perception that the government should play a larger role in stabilizing the economy. This led to increased support for policies aimed at regulating financial institutions and providing safety nets for those affected by economic downturns.
• In what ways did the ideological responses to the Great Recession differ among political parties in the U.S.?
  • The ideological responses to the Great Recession highlighted stark differences between political parties. Democrats generally supported increased government spending and regulatory measures to address economic instability, while Republicans emphasized reducing government involvement and promoting free-market solutions. These contrasting viewpoints shaped political debates about fiscal stimulus versus austerity measures as part of broader economic policy discussions.
• Evaluate how the legacy of the Great Recession has shaped contemporary economic policy debates and party ideologies.
  • The legacy of the Great Recession continues to influence contemporary economic policy debates by reinforcing discussions around income inequality and financial regulation. The crisis exposed vulnerabilities in deregulated markets, leading to lasting skepticism toward unrestrained capitalism among some policymakers and voters. This has resulted in a push for more progressive policies, such as wealth redistribution and stronger consumer protections, altering party ideologies as they adapt to changing public sentiments shaped by the recession's aftermath.

Related terms

Subprime Mortgage Crisis: A financial crisis that occurred when a significant number of high-risk mortgage borrowers defaulted on their loans, leading to a collapse of housing prices and widespread bank failures.

Fiscal Stimulus: Government measures aimed at increasing economic activity, often through increased public spending and tax cuts, implemented during the Great Recession to combat economic decline.

Dodd-Frank Act: A comprehensive set of financial regulations enacted in response to the Great Recession, aimed at reducing risks in the financial system and protecting consumers from abusive practices.