Question:

In retrospect, what set of macro policies, if anything, should we have conducted to achieve a better recovery? Explain and address the arguments favoring active versus passive policymaking.

• Background: The Great Recession of 2007-2009 was one of the most serious economic downturns in U.S. history since the Great Depression. The recession began in December 2007. Interest rates at the time were very low, close to zero. Despite the American Recovery and Reinvestment Act of 2009, a nearly $800 billion fiscal stimulus and an expansionary monetary policy, it took the economy quite some time to get back to normal.