The recession of 1973-1975 in the U.S. came about because of rocketing gas prices caused by OPEC’s raising oil prices as well as embargoing oil exports to the U.S. Other major factors included heavy government spending on the Vietnam War, and a Wall Street stock crash in 1973-74.

The Great Recession refers to the economic downturn from 2007 to 2009 after the bursting of the U.S. housing bubble and the global financial crisis. The Great Recession was the most severe economic recession in the United States since the Great Depression of the 1930s.

Causes of the Recession The Great Recession—sometimes referred to as the 2008 Recession—in the United States and Western Europe has been linked to the so-called “subprime mortgage crisis.” Subprime mortgages are home loans granted to borrowers with poor credit histories. Their home loans are considered high-risk loans.

The U.S. Recession of 1973-75. The Recession of 1973-75 in the U.S. At the time the recession of 1973-75 was considered a severe recession. It was the most severe since World War II.

On the international economic scene, the year 1977 saw the spread of protectionism, increasing trade friction, and international currency unrest while the major developed countries suffered from business stagnation, unemployment, and inflation.

This relatively mild recession coincided with an attempt to start closing the budget deficits of the Vietnam War (fiscal tightening) and the Federal Reserve raising interest rates (monetary tightening). During this relatively mild recession, the Gross Domestic Product of the United States fell 0.6 percent.

Throughout 1989 and 1990, the economy was weakening as a result of restrictive monetary policy enacted by the Federal Reserve. The immediate cause of the recession was a loss of consumer and business confidence as a result of the 1990 oil price shock, coupled with an already weak economy.

The recession of the early 1990s lasted from July 1990 to March 1991. It was the largest recession since that of the early 1980s and contributed to George H.W. Bush’s re-election defeat in 1992.

The 1990s were remembered as a time of strong economic growth, steady job creation, low inflation, rising productivity, economic boom, and a surging stock market that resulted from a combination of rapid technological changes and sound central monetary policy.

In 1994, the economy was emerging from a big recession. How economists define periods of economic downturn A recession is a period of decline in general economic activity, typically defined when an economy experiences a decrease in its gross domestic product for two consecutive quarters.

The reason that unemployment and inflation was falling together in the 1990s and later is because underemployment was rising. Firms had devised a new way of creating labour slack, which allowed them to restrain the growth in wages and pursue higher margins.

When inflation looks set to rise, they typically tighten their stance, generating a little more unemployment. When inflation is poised to fall, they do the opposite. The result is that unemployment edges up before inflation can, and goes down before inflation falls. Unemployment moves so that inflation will not.

If there is an increase in aggregate demand, the price level will go up. Once wages have adjusted to that inflation in the long run, SRAS decreases and returns the economy to full employment output. Shocks do not cause economic growth, only changes in full employment output cause economic growth.

In the long run, the Phillips curve will be vertical since when output is at potential, the unemployment rate will be the natural rate of unemployment, regardless of the rate of inflation. The rate of frictional unemployment is affected by information costs and by the existence of unemployment compensation.