1975 Recession Case Study

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Case Study: 1973 – 1975 Recession
The recession of 1975 was one of the most important recession because it was really the first time the government had used fiscal policy and handled a recession well. This was the first post-cold war recession and it had ended an expansion that had lasted several years. This recession was very important because of the way the government restored economy and the policies and tools they set forth was really one of the first of its kind and it really set the bar for how to respond to future recessions. This was also one of the first recession that started because of politics. This was the first recession where politics met the economy and the U.S. realizes it needs to start producing oil and other goods in its own count so we don’t need to rely on other countries because if a war was to start and they stopped trading with us we could deal with another shortage and raise in price. To give some historical perspective, at around this time we were still in the Vietnam war. The government was spending a massive amount of money on this war which many people opposed. During this recession was also when Richard Nixon resigned and Gerald ford took office in 1974 during the heat of the recession.

II: Causes of Recession

A recession is a decline of economic activity. This slowdown means there are less goods produced in a market, which reduces number of those who are employed, and increases the price of goods in that market. There were many causes of the 1973 recession. One of the causes that really started the recession was the oil crisis of 1973. Members of the OPEC raise the price of oil from 3 dollars to nearly 12 dollars. This decreased the demand for vehicle’s made in the United States. The reason f...

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...d a good job on handling this recession. They restored employment and decreased inflation as well as stimulate economic growth and restored balance. I think that this recession could have been very severe and without the fiscal stimulus package it could’ve worsened into a depression. It taught American economist a lot about the importance of fiscal stimulus and how effective it really. This recession was really the first time the government had used fiscal policy to help recover from a recession and it showed people that monetary policy is effective but there are other ways as simple as a cut in taxes or a tax rebate and although it may slightly increase the deficit if outlays are not reduced it is still a reliable way of dealing with it. It also makes you think about how many severe recessions this policy could have prevented as well as aided in the recovery of.
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