TECO601 Principles of Economics

Task:

To answer the following questions, students should use a sum of relevant economic theories (if require) for the justification of their answers. Students can also use figures (i.e., supply and demand curves) for presenting their answers.

Consider the financial crisis 2007-2009 in USA.

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1. Explain the origin of this crisis. Provide a summary of this crisis, consisting of the reasons of this crisis, and the breadth and extent of the crisis. Identify countries and markets involved in the crisis.

Now, assume that the crisis has been continuing for 10 years. We call this period as a long run period.

2. Explain the effect of this crisis on USA’s GDP in long-run? 

3. Explain the effect of this crisis on USA’s inflation rate in long-run? 

4. Explain the effect of this crisis on USA’s labour market in long-run?

5. Explain the effect of this crisis on the levels of Americans’ consumption in long-run?

6. Explain the effect of this crisis on the levels of USA’s investment in long-run? 

7. Explain the effect of this crisis on USA government’s Budget in long-run?

8. Assume that you are a policy maker in USA’s government and central bank; how you can recover the crisis by changing macroeconomic variables? 

9. During the crisis, How USA can recover its output gap if it faces an expansionary gap?

10. During the crisis, How USA can recover its output gap if it faces a contractionary gap? 

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