Question

America's painful experience of regulatory overreach is still ahead. When the subprime-related recession ended in mid-2009, economists were predicting a strong recovery. In early 2010, the Office of Management and Budget forecast average real GROSS domestic product growth of 3.7 per cent in 2016, the Congressional Budget Office estimated 3.3 per cent in the same period and the Federal Reserve forecast 3.5 to 4 per cent growth through 2014. In fact, during the recovery from 2010 to 2016, GDP growth fell to 2.1%, the lowest in 80 years.

Answer 1

After the 2009 recession, the U.S. GDP growth fell below its potential, averaging only 2.1% from 2010 to 2016 instead of the predicted 3.3 to 4%, marking a period of disappointing economic performance that sparked discussions on economic policy effectiveness.

Step-by-step explanation:

The expected strong economic recovery after the subprime-related recession that ended in mid-2009 did not materialize as forecasted by economists and government bodies. Instead of the predicted real Gross Domestic Product (GDP) growth of about 3.3 to 4 percent, the actual GDP growth from 2010 to 2016 averaged only 2.1%, marking the lowest rate in 80 years. This fell well below the potential GDP as estimated by the nonpartisan Congressional Budget Office, which outlines both the actual data for the increase in real GDP since 1960, and the potential GDP, a smoother line indicating the long-term upward trend that determines the economy's size.

Despite periods of growth, such as during the late 1990s or from 2018 to 2020, the economy frequently experienced fluctuations where it would be 1-3% below or above the potential GDP. Real GDP lagged behind potential growth after the Great Recession, prompting a debate regarding the effectiveness of the government's stabilization efforts and discussions on the contrasting neoclassical and Keynesian economic perspectives.