As we have discussed in class, there was a collapse in housing markets and financial markets in 2008. On the graph, we see a decrease in actual real GDP in 2009. Use an AS/AD model to show how the economy got to the situation displayed in the graph in 2009. (Start with your graph from 2007, the shift the appropriate curve and show the new SR equilibrium in 2009.) **In 2009, The United States Federal government passed legislation to increase goverment spending and cut taxes. At the same time, the Federal Reserve Bank took actions to lower interest rates and increase the money supply. What does this do to the AS/AD model from the question above? Show which curve shifts after these policies and the way the curve shifts. Show the resulting SR equilibrium in 2016. How does the SR equilibrium compare to the LRAS curve?**
!! YOU WILL NEED TO CREATE GRAPHS !! answer the second part**
As we have discussed in class, there was a collapse in housing markets and financial markets in 2008. On the graph, we see a decrease in actual real GDP in 2009. Use an AS/AD model to show how the economy got to the situation displayed in the graph in 2009. (Start with your graph from 2007, the shift the appropriate curve and show the new SR equilibrium in 2009.)
**In 2009, The United States Federal government passed legislation to increase goverment spending and cut taxes. At the same time, the Federal Reserve Bank took actions to lower interest rates and increase the money supply. What does this do to the AS/AD model from the question above? Show which curve shifts after these policies and the way the curve shifts. Show the resulting SR equilibrium in 2016. How does the SR equilibrium compare to the LRAS curve?**
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