In your response posts, comment on at least two posts from peers who chose different factors than
Question:
post 1
The period from December 2007 to June 2009, known as the Great Recession, was a time of significant economic decline in the United States. This period saw a decrease in both aggregate demand and aggregate supply, leading to a shift in the economy. The reduction in consumer and business confidence, coupled with decreased government spending and increased taxes, led to a decrease in total spending, causing the aggregate demand curve to shift to the left. At the same time, an increase in the cost of key inputs caused a decrease in the total quantity of goods and services firms were willing to supply, resulting in a leftward shift of the aggregate supply curve.
This shift in the economy had a profound impact on key economic indicators. The largest decline in the postwar era was seen in the real GDP, which fell 4.3% from its peak in 2007Q4 to its trough in 2009Q2. Unemployment rates also rose from 5% in December 2007 to 9.5% in June 2009, reaching a peak of 10% in October 2009. This was due to the decrease in aggregate demand, which reduced the demand for labor. Interestingly, despite the economic downturn, inflation did not decrease as much as expected, suggesting that firms were attempting to maintain their profit margins despite the decrease in demand. Therefore, the Great Recession had a significant impact on the U.S. economy, causing shifts in both aggregate demand and aggregate supply, which in turn affected GDP, unemployment, and the price level.
post 2
The great recession was linked to a burst of the housing market where many banks were heavily invested. The loss of capital from the decline in housing values led to banks to cut back on lending which led to a contraction of the economy. This resulted in a shift in aggregate supply. The effect on the economy from the inflation and loss of lending caused a shift in the aggregate demand. These shifts affected GDP, unemployment and inflation.
I will look at the loss of GDP during the recession. As housing values decreased rapidly, the aggregate supply increased resulting in an increase in inflation and a lowering of GDP. A worsening of the recession due to bank failures and loss of lending ability led to a decrease in aggregate demand which lowered inflation and further reduced GDP. The reason the recession lasted as long as it did, was mainly due to the fact that lowering interest rates would have been the natural reaction. Interest rates in this case were already low and in order for them to be lowered enough to affect the recession would have cause negative interest rates, which are unfeasible. The recession also caused investors to save rather than invest which also worsened the monetary supply, further reducing GDP.
Expert Answer:
Comment on post 1 I appreciate your analysis of the Great Recession and its impact on unemployment Its true that the decrease in aggregate demand duri... View the full answer
