Forefront in the Classroom :: Fall 2011
- What name has the mainstream media given Americans living through this most recent recession?
- They have been dubbed "Generation Recession."
- What are some of the strategies that the Federal Reserve has undertaken to move the nation's economy past the Great Recession?
- President Pianalto said economic conditions are likely to warrant keeping the federal funds rate--the short-term policy interest rate--low until at least mid-2013. The Federal Reserve has also announced plans to alter the composition of asset holdings to put even more downward pressure on longer-term interest rates. Low interest rates can help persuade businesses to invest and consumers to spend.
Upfront: Toward Mobile Payments
- What is the difference between mobile banking and mobile payments?
- Mobile banking services allow customers to monitor account balances, transfer funds, etc. from their phones. Mobile payments allow customers to use their smartphones as credit or debit cards.
- Why isn't mobile banking catching on in the United States the way it is in other countries such as Kenya and South Africa?
- America already has advanced payments systems with so many participants, such as banks and telecom services, that coordination is difficult. In emerging countries, there may be only one telecom provider and a few banks.
How the Recession May Change America
- When did the "Great Recession" begin and end?
- The 18-month downturn that many people commonly refer to as the "Great Recession" began in December 2007 and ended in June 2009.
- What are some aspects of our economic lives that may be affected by the Great Recession?
- Among the many aspects of economic life that could be affected are labor force participation; housing choices; personal savings; the financial system; the scale of government; and monetary policy.
- What are some of the root reasons why people save money?
- People save because it ensures their ability to consume later. The amount that people save or borrow can depend on several other factors including how confident they are about their future income and the economy and whether they feel wealthy or poor.
- How do high saving rates promote growth and improve standards of living?
- Savings usually are converted to investments, in durables like factories and equipment. Higher investment levels translate to higher productivity levels. Standard economic models indicate that higher productivity means higher incomes.
Renting: The New American Dream
- What impact did the "Great Recession" have on housing?
- During the financial crisis, home values crashed from their 2006 peak of almost $23 trillion to just over $16 trillion during the first quarter of 2011. During that period, lenders have tightened underwriting standards, making it difficult for peotential homeowners to get loans. U.S. homeownership rates have been heading down, and rental rates going up.
- Name two options for keeping neighborhoods viable that policymakers are re-evaluating in the aftermath of the Great Recession.
- Low Income Housing Tax Credit--An indirect federal subsidy used to finance the development of affordable rental housing for low income households.
- Mortgage Interest Deduction--A common itemized deduction that allows homeowners to deduct the interest they pay on any loan used to build, purchase, or improve their primary or secondary residence.
Use It or Lose It: College Grads and Underemployment
- Growing numbers of college graduates are finding themselves with jobs that don’t actually require a higher education. Read more (PDF)
- What does it mean when economists call college grads "mismatched"?
- College grads are called mismatched when they are overqualified for the type of job they are doing. Mismatches occur when workers accept jobs for which they are overqualified because none are available in their field or when workers who want to work full time accept part time jobs because that's all they can find.
- What are some of the problems created when college graduates take low-skilled jobs?
- While grads are employed in low-skilled jobs, they may not be producing a high-value product or service, earning enough to pay off their debts, or getting a high return on their human capital.
Interview with Price Fishback
- What was the unemployment rate during the Great Depression--that is, between 1929 and 1941?
- In 1929, unemployment started out at around 2 percent, but it had moved up to 10 percent by 1930 and climbed to 16 percent in 1931. Then, between 1932 and 1935, unemployment peaked at 20 percent. It dropped to 14 percent in 1937, but shot back up to 19 percent in 1938. Unemployment did not fall below 10 percent until 1941.
- Explain what happened to real output in the economy between 1929 and 1933?
- Real output represents the quantity, rather than the dollar value, of goods and services produced. Real output in the economy dropped by 30 percent over four years. In 1933, the economy was producing only 70 percent of what it had produced in 1929. In terms of output, it was as if you had cut off the western half of the United States.
- Was there increased inflation during the Depression--or deflation?
- There was tremendous deflation during the Depression. The price level dropped 30 percent between 1929 and 1933, so people could buy a great deal more with a dollar at the end of the period than at the beginning.