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Structural Stagnation Dilemma - Essay Example

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It was neither a recession nor a depression. As a normal downturn in the business activities, the national output fell and consequently unemployment continued to increase…
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Structural Stagnation Dilemma
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Structural Stagnation Dilemma

Download file to see previous pages... Economist deliberated on the new issue which carried much weight to the US economy and several hypotheses were put across. The economist named this strange phenomenon as the structural stagnation dilemma. The argument was that the problem that had recently hit the US economy were not just normal economic issue, but structural problems caused by globalization.
Regardless of whether one approves the structural stagnation dilemma presented by various author, it is quite useful in generating ideas this problem. It illustrates how economic reasoning blends distinct economic concepts and ideas from both macroeconomics and microeconomics into a reasonable explanation for contemporary events. Secondly, the economic reasoning is supported by empirical testing of the ideas hence giving more reliable information.
According to this argument, structural stagnation has both the short-term and the long-run causes. The short-run economic causes are intricately linked to consequences of the financial crisis. The long-run manifest itself in issues such as globalization, trade deficits, and exchange rates. These two are perfectly related in that one of the core problems of this financial problem was that the government was trying to avoid handling problems brought about by globalization.
The structural stagnation can be explained from a number of economic fronts. For instance, US have experienced a couple of recessions before; however, the recovery has always been slower with each passing recession. The growth has also been slow and gradual. Intuitively, this pointed out to some possibility of other causes rather than just recession. Faced with this kind of problem with each passing year, the economist began to grapple that something must have been wrong with the economy. This was the hallmark of the structural stagnation theory which predicted a recovery characterized by slow growth ...Download file to see next pagesRead More
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