Deeper U.S. Recession without Strong Fiscal and Monetary Measures

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The United States and most other advanced and emerging market economies adopted very strong fiscal and monetary measures to overcome the 2008–2009 financial and economic crisis. Without those measures, the great recession would have been deeper and lasted longer. Figure 18.11 shows the level of U.S. real GDP under four different scenarios: (1) the baseline scenario (the top line), which includes the effect of the strong stimulus package and powerful financial measures (huge expansion of liquidity) undertaken by the United States to combat the great recession of 2009; (2) the scenario using only financial measures (the second from the top line); (3) the scenario using only the stimulus package (the third from the top line); and (4) the scenario using neither the stimulus package or financial measures to counter the deep recession (the bottom line). Scenarios 2 and 3 show that U.S. real GDP would have fallen more and longer; scenario 4 indicates that the U.S. recession would not only have been much deeper but would have continued into 2010.


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