Introduction to Finance

gross domestic 
product (GDP)
. The United States began the 1980s with a double-dip recession, or economic 
downturn, in “real” terms (i.e., after price changes have been factored out). A mild economic 
decline occurred in 1980, followed by a deeper decline that lasted from mid-1981 through 
most of 1982. The GDP then grew in real terms throughout the remainder of the 1980s, before 
a mild downturn began in mid-1990 and lasted through the fi rst quarter of 1991. Although 
some industries underwent substantial downsizing and restructuring, the economy continued 
to grow in real terms throughout the 1990s. As we moved into the twenty-fi rst century, eco-
nomic growth slowed both domestically and worldwide, resulting in a U.S. recession in 2001. 
Economic recovery began in 2002 and economic growth continued for a number of years until 
the United States entered into the Great Recession of 2008–09. Economic growth through 
2015 has only averaged about 2 to 3 percent annually. 
High Employment
Unemployment represents a loss of potential output and imposes costs on the entire economy. 
The economic and psychological costs are especially hard on the unemployed. While there is 
some disagreement over what we should consider full employment, it is a stated objective of 
the U.S. government to promote stability of employment and production at levels close to the 
national potential. This aim seeks to avoid large changes in economic activity, minimizing the 
hardships that accompany loss of jobs and output.
The U.S. unemployment rate reached double-digit levels during the early 1980s with a 
peak at about 11 percent near the end of 1982. As the economy began expanding, unemployment 
levels declined throughout the remainder of the 1980s until the rate fell below 5.5 percent. 
The recession that began in mid-1990, along with other job dislocations associated with cor-
porate downsizing and restructuring, resulted in an unemployment rate exceeding 7.5 percent 
in 1992. The remainder of the 1990s was characterized by a steady decline in the unemploy-
ment rate to a level below 4.5 percent. As the country entered the twenty-fi rst century, eco-
nomic activity slowed and the unemployment level began rising. With an economic recovery 
beginning in 2002, employment opportunities improved for a period of years. However, the 
economy began slowing in 2007 and entered into a steep decline in 2008, causing the unem-
ployment rate to exceed the 10 percent level. Even with economic recovery beginning during 
the second-half of 2009, the unemployment rate remained at the 10 percent level at the end of 
2010, but it has since been reduced to slightly below 5 percent in early 2016.