A decline in stock prices reduces household wealth and consumption spending. Estimates of U.S. stock market losses
Question:
a. It is estimated that the propensity to spend out of stock market wealth is relatively small. Assume that consumers spent $0.03 out of every additional $1 of stock market wealth. Estimate the GDP loss due to the fall in the stock market during 2008.
b. Assuming that potential GDP was $13,610 billion in 2008, what effect did the loss of wealth from the stock market have on the output gap?
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a 7000 03 210 billion excluding any addit...View the full answer
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Related Book For 
Macroeconomics
ISBN: 9780132109994
1st Edition
Authors: Glenn Hubbard, Anthony Patrick O'Brien, Matthew P Rafferty
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