US in recession NBER declared in December 2008 that the US economy had gone into a recession in December 2007 (NBER, 2008). Recession, according to NBER, is defined as a significant deceleration in economic activity of an economy, and that spreading across various sectors of the economy. The NBER committee for deciding the business cycle looks into data related to sector wise production, employment, real income, etc. (NBER, 2008). The macroeconomic indicator that is observed by NBER derived from BEA is quarterly data of real gross domestic product (GDP) and real gross domestic income (GNI). Figure 1 demonstrates the changes in real GDP and GNI since first quarter of 2006 through second quarter of 2010. Figure 1: Quarterly Real GDP and GNI change in the US, Source BAE (BEA, 2010) The US economy has been experiencing a fall in the real GDP since first quarter of 2006; however, it was a persistent downfall. However, it was from the last quarter of 2007, that the economy registered a persistent fall in the real GDP growth rate. The situation became worse from the second quarter of 2008, when the economy went into a phase of negative economic growth that continued until third quarter of 2009. On looking at other data related to the recession, it can be observed that personal consumption of the US economy fell in line with the fall in the growth of real GDP. The fall in consumption was highest in case of durable goods like automobiles, household furnishings, recreational goods, etc. the total industrial production fell considerably during the period. In 2008, industrial growth was at -7.6 percent and then fell by -3.8 percent in 2009 (FED, 2010). Therefore, the observation of these figures presented by BEA demonstrates and supported NBER claim of 2008 that the US economy went into a recessionary phase in last quarter of 2007. Measures for recovering GDP The first step taken by the US government aiming at recovering the GDP during the 2008-10 recessions was an incentive given to first time home buyers and “cash for clunkers” in order to provide impetus to the manufacturing and real estate sector (Homan, 2009). Further, the government took many steps to help the private sector to recover. First were a series of bail out given from the government exchequer for private companies like Ford and GM. Fiscal stimulus presented by the US government in terms of tax cuts had helped government to reduce unemployment and therefore increase real GDP. Further, government expenditure was increased considerably in order to help state governments retain employees, maintain investment on infrastructural projects, and reduce taxes. The reduction in taxes was known as the “financial crisis responsibility fee” (The Economist Intelligence Unit, 2010, p. 13). However, the fall in tax revenue led to deepening of the US fiscal deficit. Further, there were stimulus measures taken by the government to increase employment as there were 85000 job cuts in December 2009 (The Economist Intelligence Unit, 2010). The federal government brought in a stimulus package of $154 billion to be spent on infrastructure projects that were expected to improve the unemployment situation (The Economist Intelligence Unit, 2010). The monetary policies taken by the Fed