Fiscal policy

• What fiscal policy was used during the global financial crisis of 2007-2008?


  Fiscal policy
• What were the effects of the global financial crisis (GFC)?

  • Low consumer and business confidence
  • Unemployment rose from 4.7% in late 2007 to 10% in late 2009
  • Financial institutions declared bankruptcy
  • Auto industry required government bailouts to survive
  • Stable growth with GDP growth rate averaged around 2.8% between 2004 and 2007
  • Recession with GDP contracting by 2.5% in 2009
• What was the unemployment rate in late 2007

  1. 7%
• What was the unemployment rate in late 2009 during the GFC?

  10%
• What happened to financial institutions during the GFC?

  Many declared bankruptcy
• What did the auto industry require to survive during the GFC?

  Government bailouts
• What was the average GDP growth rate between 2004 and 2007?

  1. 2.8%
• By how much did GDP contract in 2009?

  1. 2.5%
• What fiscal interventions did the US government implement during the GFC?

  • EESA in 2008: Allowed treasury secretary to buy $700 billion of troubled assets
  • ARRA in 2009: Worth $787 billion, included tax breaks and infrastructure investment
• How much was the ARRA worth?

  $787 billion
• What were the results of the fiscal interventions during the GFC?

  • Bailout of the auto industry saved key sectors and jobs
  • Persistently high unemployment
  • Rising national debt
• What is fiscal policy?

  Using government spending and taxation to influence aggregate demand