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New Macroeconomics by Apek Mulay

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CHAPTER 2

Global Economy in the New Millennium

The Great Recession began at the end of 2007, but its causes were hidden in what had happened at the start of the new millennium. The chairman of the Federal Reserve in 2000 was Alan Greenspan, whose first term began in 1987, the year of the greatest stock market crash in history. Share prices fell more than 21 percent on October 19, 1987, almost double the level of a single-day fall in the Dow Jones Index in October 1929. Greenspan acted with great speed, increased the supply of money, and cut interest rates sharply soon after the 1987 crash. With more money available to banks and brokerages, share prices stabilized within a few months, and the economy began to grow again.

Greenspan learned an important ...

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