The Great Crisis and Great Recession of 2007–2009



In spite of monetary and fiscal stimulus of unprecedented magnitude implemented relatively quickly, the Great Crisis severely impacted U.S. economic activity during 2008, 2009, and several years beyond. By most conventional measures of cyclical activity, the period extending from December 2007 through June 2009 was the most severe economic contraction in the United States since the Great Depression of 1929–1933. The Depression, in which real gross domestic product (GDP) fell by 29 percent and the unemployment rate reached 25 percent, dwarfed anything in U.S. experience, before or after. But the 2007–2009 economic contraction, dubbed “The Great Recession,” was the most severe of the ten post-1950 U.S. recessions. This chapter examines the ways in which the Great Crisis led to a severe contraction in aggregate expenditures, output, and employment, thereby exacting a very large price in terms of the well-being of the nation.


Gross Domestic Product Unemployment Rate House Price Federal Reserve Stock Prex 
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  1. 3.
    See Douglas Staiger, James Stock, and Mark Watson, “How Precise Are Estimates of the Natural Rate of Unemployment?” in Christina Romer and David Romer, eds., Reducing Inflation: Motivation and Strategy (Chicago, IL: University of Chicago Press, 1997). The authors estimate that in 1990 the NAIRU was 6.2 percent. However, their statistical procedures indicated they could be 95 percent confident only that the true NAIRU was within a range of 5.1 to 7.7 percent.Google Scholar

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© Lloyd B. Thomas 2013

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