I NEED ONE INITIAL POST AND 2 RESPONSES
Between 2007 and 2009, the United States experienced a severe financial crisis and economic downturn commonly known as the Great Recession. Starting in 2006, housing values fell 30%, causing losses in mortgage-backed securities for families and financial institutions. The recession was marked by a drop in aggregate demand that caused a decline in GDP and an increase in unemployment.
In your initial post, draw or find an example of an aggregate demand and aggregate supply (AD/AS) model that illustrates the general trends of the U.S. economy during the Great Recession. (The example may be from your own research or from the textbook.) In addition to your image, provide a response to the following:
How did the AD/AS equilibrium change over time? Support your claims by referring to your AD/AS model.
Select an economic factor (GDP, unemployment, price level) and explain what impact any shifts in AD or AS (or both) had on your chosen factor.
In your response posts, comment on at least two posts from peers who chose different factors than you did. Explain how the economic factors are related. Share a news article that presents a different perspective on the economic outcomes of the Great Recession from your peers’ perspectives.
RESPOND TO :
1.GLENDON HOWELL:
Hey fellow classmates and professor,
How did the AD/AS equilibrium change over time? Support your claims by referring to your AD/AS model.
During the Great Recession, the AD/AS model of the U.S. economy showed significant shifts. The equilibrium in the AD/AS model changed as aggregate demand (AD) decreased due to lower consumer confidence and reduced spending. This shift led to a leftward shift in the AD curve, resulting in a lower equilibrium output and a higher unemployment rate. The aggregate supply (AS) also shifted leftward due to decreased productivity and higher input costs, further exacerbating the economic downturn.
Select an economic factor (GDP, unemployment, price level) and explain what impact any shifts in AD or AS (or both) had on your chosen factor.
The GDP, which is a measure of the economy’s output, contracted significantly during the recession as both AD and AS decreased. This contraction in GDP was accompanied by a rise in unemployment, as the equilibrium output fell below the potential GDP, indicating an economy operating below its capacity. The price level, on the other hand, experienced downward pressure due to the excess capacity and lower demand, leading to a period of disinflation (temporary slowing pace of price inflation). These shifts in the AD/AS model reflect the complex interconnectivity between economic factors during the recession and highlight the model’s utility in analyzing macroeconomic trends and policy impacts in local, regional and global markets.
Reference:
Cashin, D., Lenney, J., Lutz, B., & Peterman, W. (2018). Fiscal policy and aggregate demand in the USA before, during, and following the Great Recession. International Tax and Public Finance, 25(6), 1519-1558.
2JESSICA SWIFT :
Hello class,
The great recession which occurred from 2008-2009 had a significant impact on the aggregated demand/aggregate supply model. This economic downturn was insighted by a decrease in ad/as and a rise in unemployment.
The significant changes in the AD were decreased consumer spending due to facing job loss, housing stock prices, and reduced income per household. There were decreased investments due to business’ not investing in new projects because of the uncertain future and economic conditions.
Changes in AS were decreased productivity due to the increase in unemployment resulting in quantity of goods/services to leftward shift in the curve. Unemployment percent increasing and having a significant shift in the ad/as model. This decrease led to job loss and demand for labor.
In conclusion the great recession led with significant shifts in the AD/AS model with decrease in aggregated demand and a shift in aggregate supply subsequently with a rise in unemployment.
Aydın, S. (2022, January 6). 2007–09 Financial Crisis AD/AS Analysis – selva aydın – Medium. Medium. https://medium.com/@selvaaydin050/2007-09-financial-crisis-2f8ae360d01c
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