Recession refers to that period when there is a significant reduction in economic activities that last longer than a few months. Some of the indicators of the recession include a decrease in industrial production, unemployment, low real incomes and reduced wholesale-retail trade. Additionally, the technical sign of a recession is two subsequent quarters of negative development as measured by a particular country’s gross domestic product (GDP). One of the prominent periods, when the US was in severe recession, was during the Great Depression that occurred between 1929 and 1933 (Cole & Ohanian, 2014). During that period the GDP, employment, industrial production as well as the prices dropped substantially.
Several remedies can be used to bring back the economy to life. The economy can be improved by regulating the monetary as well as the fiscal policies. The monetary policy is usually implemented by the central bank (Arestis & Sawyer, 2016). To revive the economy, the Central bank ought to release money to the various banks in the country and direct that the banks charge low-interest rates on loans. Such an approach aims to ensure that there is sufficient circulation of money in the economy, an aspect that makes people increase their spending. The release of more money in the economy means that the economic activities will be boosted hence the high probability of the creation of employment activities.
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Conclusively, the fiscal policy entails the actions that are taken by the government to regulate the economy. The best way that the government can pull the country out of recession is by cutting taxes. Low taxes translate into higher savings. People may use their savings to start businesses. Increased business activities improve the creation of employment opportunities hence reducing the number of unemployed people. Therefore, for the country to get out of recession, taxes ought to be cut while high spending ought to be enhanced.
References
Arestis, P., & Sawyer, M. (2016). Re-examining monetary and fiscal policy for the 21st century. Books .
Cole, H. L., & Ohanian, L. E. (2014). Re-examining the contributions of money and banking shocks to the US Great Depression. NBER macroeconomics annual , 15 , 183-227.
