During 2008, the United States began to experience what has become known as the Financial Crisis. The Financial Crisis resulted in a drop in housing prices and negatively shocked AD resulting in unemployment. Real GDP fell from $13.64 Trillion to $13.26 Trillion. (Here is a link to Google Data’s Real GDP graph: Google Data - Real GDP. Be sure to fully answer each question in your response. 1. Describe the problem in context of an Aggregate Demand/Aggregate Supply model. What happened to equilibrium output and the price level? 2. Design a fiscal policy tool using government spending or the tax system that would attempt to fix the problem. Describe that fiscal policy tool in complete detail. Why did you choose that particular method? The reduction in GDP was about $380,000,000,000 (Three hundred and eighty billion dollars.) 3. With this large of a drop, what size fiscal policy tool would your recommend? How does the multiplier play into things? 4. What are potential problems with your fiscal policy tool? 5. How do your political beliefs affect what policy tools you believe should be used?
During 2008, the United States began to experience what has become known as the Financial Crisis. The Financial Crisis resulted in a drop in housing prices and negatively shocked AD resulting in
1. Describe the problem in context of an Aggregate Demand/
2. Design a fiscal policy tool using government spending or the tax system that would attempt to fix the problem. Describe that fiscal policy tool in complete detail. Why did you choose that particular method?
The reduction in GDP was about $380,000,000,000 (Three hundred and eighty billion dollars.)
3. With this large of a drop, what size fiscal policy tool would your recommend? How does the multiplier play into things?
4. What are potential problems with your fiscal policy tool?
5. How do your political beliefs affect what policy tools you believe should be used?
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