The Dilemma of Policy in a Balance Sheet Recession
This chapter addresses the fundamental problem faced by policymakers after the financial crisis: how to reverse the decline in employment and stimulate growth. Although US unemployment rate dropped into single digits in 2013 and has continued to fall up to the date of this writing (April 2015), the percentage of employed working age adults, many of whom are not counted as unemployed after suffering long spells of unemployment, remains at an historically low level (see figure 13.1).3 Unemployment is a personal hardship, and when a sizeable portion of the workforce experiences long spells of unemployment, the depreciation in their skills degrades the productive potential of the entire economy. Therefore, the low rate of employment in the US economy is a major ongoing social and economic problem.
KeywordsInterest Rate Financial Crisis Fiscal Policy Government Debt Current Account Deficit
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