Question

Think back to your home town (or a town that you know well), and write about what your town was like 5-6 years before the Great Recession of 2008, what occurred during the recession and what it is like today. Make note of economic activity, town budget issues, conditions in the community, and issues that have affected your friends and your family. Compare and contrast these time periods.

Answer 1

Today, most economies are going through a period of extreme recession which is quite similar or even in excess of the Great Recession which started int he United States of America due to the housing crisis. As establishments remain shut, and people are not allowed to move outside their houses, due to the fear of the Corona Virus, the economics of the country is in a bad shape probably even worse than the recession during 2008.

This is primarily because the recession caused by the Corona Virus pandemic is not cyclical but is caused by external factors which for most economies has been beyond the control of the governments or the local bodies.

For the purpose of this case study, we look at New York to be the town or city of choice which we will be discussing and evaluating the unemployment rate and other similar conditions to draw conclusion from the same.

During the recession of 2008, Banks were carelessly granting loans to the public for acquiring property, the price of which was uncertain. As real estate prices began falling, people gave away their property towards the loan however with no buyers available in the market place, banks then made a huge mess and were in constant losses.

In this situation the unemployment in the country rose as people did not have sufficient money available with them and were fighting legal battles towards loan recoveries. As aggregate demand went lower, the society was full of people in search of jobs but unable to get the same. Relatives who owned enterprises or small shops were further worst hit as they lost a lot of profit and at times even made significant losses to be able to clear the unsold inventory which was adding cost of operations.

The unemployment rate during that time is expected to have been over 8-9% which was way higher than the average of 4-5% during the last 5 years in the city. Meaning that from 2003-2008 the unemployment levels were low and were in the 4-5% average. The city was also stable and was growing with a lot of stability.

Coming over to government budgets, the governments during 2003-2008 were not focusing on recession as it did not seem likely it was more focused on creating infrastructure in the city and fastening the growth path on which the country at that time was. It did not have to use its reserves on increasing demand within the city. However, this drastically changed in the great depression, wherein the governments had actively begun investing in the markets and had created new tenders so as to supply the market with money and increase investment and spending. The tax rates were also cut during the time period of 2008-2010 so as to help people in being able to manage themselves in a better manner and as much as 3000$ in social security were added so as to provide relief to the common public per year.

Now, when we look at the conditions today, the unemployment rate due to the Corona Virus pandemic is at its peak with up to 14% people staying unemployed in the country. The recession has meant that most industries in the city have contracted and production across all major sectors has been impacted due to the same the aggregate demand for goods and services is falling rapidly.

Post the 2008 recession, there was some period wherein the inflation rate was in check and the country saw economic expansion due to the measures taken by the Federal Reserve wherein it reduced the interest rates and the net effect was that the economy slowly grew at an average rate of 2% per annum from 2010-2020. The economy came back to its growth path and producers around us continued growing. We have examples of companies such as Apple which grew to the size of 2 Trillion dollars in the country in valuation. The same had its impact on New York as well.

Please feel free to ask your doubts in the comments section if any.