Question

Write a 350- to 700-word analysis assessing how 1 of the following major economic events influenced supply, demand, and economic equilibrium in the US economic activity:

• Rapid price increases, such as caused by the 1973 oil embargo or the aftermath of a major hurricane
• Dramatic employment drops, such as the combined impact of the 2006 housing bubble burst and the subsequent Great Recession
• Crippling interest rates by the Federal Reserve, such as those of the 1975 – 1985 time period
• Collapse of the Soviet Union in 1991 and the end of the Cold War, and the “peace dividend”
• The dot-com bubble from 1994 to 2000, and the subsequent dot-com crash

Answer 1

SOLUTION:-

GREAT ECESSION : HOUSING BUBBLE BURST

* The above graphs show how unemployment increased to 11 percentage and above and work productivity declijed during Great Recession and subsequently the government had adopted expansionary monetary policy to cit down interest rates to 0.75 percent and hold constant till 2015 and indulged in buying 800 billion dollar government securities as part of open money operations and quantuat3easing programme.

* The interest rates prior to 2007 from 2005 were relatively higher as contractionary monetary policy was practised by US FEd due to high inflation and hot money flowing in from Asian financial markets.

* The period of 2010 to 2015 saw interest rates constant, coupled with an expansionary fiscal policy like unemployment insurance, program like TARP and TNAF and tax cuts and tax credits to businesses.

* The macroeconomic intention here was to revive the economy to greater heights and minimise deflation such that the US dollar also stabilises and inflation targets remian well within 3 percentage band.

* This crested ripple effect as liquidity rose substantially and disposable incomes rose for 22% of individuals after tax cuts, unemployment insurance provided the fillip, and unemployment reduced due to higher credit availability to corporate which all sledgehammered the economy to better position of 0.5% year on uear GDP growth and ultimately fructifying to robustness by end of 2015 post which US fed looked to raise the interest rates after Donald Trump election in 2016.

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