‘15 days of Economics’

Day 13: What do you know about the big recession of 2008?

In 2008, a huge worldwide recession occurred damaging global macro and microeconomics. A recession is defined as a decline or stagnation in economic growth. A global recession is defined as a decline in real per-capita world gross domestic product. The cause of the downturn in growth is due to the ‘Subprime mortgages’.

In the early 2000s, many Americans lend money from the bank due to rising housing prices. However, housing prices increased to a stage where banks had to declare bankruptcy. The U.S stock market also began to rapidly fall which many stock and share owners suffering huge losses. This caused a fall in global stocks and therefore a global recession.

Due to the recession, unemployment rose by 200%. GDP in the U.S from 2007–2009 declined by 4.3% due to the effects of downturn in growth. Industry is declined by 50% and 300million houses were foreclosed.

To rescue to dire economic, governments offered loans to banks to decrease the fall in growth. Furthermore, banks cut interest rates to ensure that companies could afford loans. The UK also cut VAT tax to ensure more affordable prices.