The Recession of 1973-1975 - 1076 Words

The recession of 1973 through 1975, was due to the Organization of Petroleum Exporting Countries (OPEC) who rose gas prices and imposed an embargo against the United States. This quickly caused oil production to be cut dramatically, leaving no choice but to increase the price in oil. This recession, I am going to pin point the causes, fiscal and monetary policy the government uses to help the economy slowly come out from the recession. Also I am going to pin point the recession’s recovery and expansion. The causes of this recession was due to the unemployment being too high and how it had rose even higher through the years. The unemployment rate was at 4.9% by the fourth quarter and rose significantly at 8.3% by the fourth quarter of†¦show more content†¦During these years, Ford was the current President who cut taxes, hoping to increase consumption goods. In 1974, the federal budget was close to being balanced with a deficit of less than 1% of GDP. In the fiscal year , the GDP rose to 3.4% and 4.3% the following year. This temporary deficit of the tax cut in 1975, helped raise the federal deficit, increasing the aggregate demand. They did not worry seeing the unemployment rate increasing rapidly in the 1974 because the enactment of new legislation ensured that a higher percentage of the unemployed end up receiving compensation in 1975. The first steps in taking action to the 1974-1975 recession was changes in taxes and spending. â€Å"These changes heavily weighted toward a higher disposable income and consumption of moderate and low income persons.† (The Economic Policy Institute) The results weren’t so great, the consumption percentage of GDP rose in 1974 to 1975 and the investment percentage of GDP was lower in 1975 than in the 1974. Giving that the Ford tax increase of 1974 was not the best policy at that time. Really, the opposite contra cyclical policy was needed because it increases aggregate demand in recessions and decreas es aggregate demand in overheated expansions. They also used monetary policy to support President Ford’s stimulus package strategy, efforts to stimulate the economy. Nominal interest rates fell at a good rate in 1974, causing the recovery to be well under way by when it began to rise again inShow MoreRelatedEmerging From The Global Recession Of 1973-19752054 Words   |  9 PagesEmerging from the global recession of 1973-1975, the resulting surge of neoliberalism transformed the global economy into a secularized faith that draws on anxiety and responsibility for sustenance. Debt answers to anxiety and allows for a greater participation in the economy, subsequently, debtors become shackled to their indebtedness, which evolves into a continuous moral burden. 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