Noah Rosenblum 5/20/09

Final Economics Paper

I. The Problem-
Today the U.S. is in the midst of a recession that is affecting people worldwide,
but not many people actually know how we got here. One can not understand the current
situation without first understanding just what a recession is. A recession is caused by a
decline in G! growth "Gross omestic !roduct#. This means that there are less
manufacturing orders, less in$estments, as well as falling housing prices and sales. As a
result, unemployment rates rise which causes retail sales to slow, causing a decrease in
production and an increase in layoffs. The cause of the current recession is made up of
many factors, but the main cause lies in the hands of many homeowners and banks. %n
&''(, falling housing prices caused many homeowners to reali)e that they would lose
money selling their home, due to their high mortgage. This led to many foreclosures
which caused panic in the banking world, because they were the ones who were buying
the foreclosed houses and they were loosing money. This in turn caused banks to stop
loaning money to each other because no one wanted to get stuck with the houses, which
were costing the banks money.
II. Indicators-
*+
%%%. ,istoric trends for indicators+
%-. !redictions for ne.t fi$e years