In the aftermath of the 2008-2009 financial crisis in the US, the output gap fell by 8% and the inflation rate fell to -2.1% in July 2009. Using the AS-AD model, explain which shock hit the economy and discuss the macroeconomic policies available to policymakers to stabilise the economy. How effective are they to stimulate aggregate demand?

In the aftermath of the 2008-2009 financial crisis in the US, the output gap fell by 8% and the inflation rate fell to -2.1% in July 2009. Using the AS-AD model, explain which shock hit the economy and discuss the macroeconomic policies available to policymakers to stabilise the economy. How effective are they to stimulate aggregate demand?

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter15: Aggregate Demand And Aggregate Supply

Section15.2: Explaining Short-run Economic Fluctuations

Problem 2QQ

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