Question

I need to write a discussion board. with citation, please

changes in aggregate demand and aggregate supply provide a foundation to analyze expansions and contractions in the business cycle. These economic fluxuations lay claim to recessions and depressions. Please research and discuss similarities and differences between the recession of 2008-2009 “The Great Recession” and The Great Depression. Be sure to include your knowledge of determinants of both sides of the markets in your answers.

Answer 1

Ans) Aggregate demand and aggregate supply are the sum of the total output demand and total production by suppliers respectively in the economy. The increase in demand at the prevailing price can lead to inflation in the economy, as a result the employment, income, interest rate, profit, all will also increase because of the increase in demand. While the recession caused by the loss of effective demand from the economy. The imbalance in money market is highly responsive to the interest rate and money demand. The lower the interest rate higher is the demand for money in the money market.

The recession and inflation are the cycle of any economy and are followed in a circle , explained in various theories.

The cause of great depression was the outburst of bubble which was caused in housing sector. The period from 2000-2007 was highly prosperous, the income and investment rate are also high in the economy the balance of payment is almost balanced, trade deficit is low. So people starting investing in housing sector, the demand in housing sector increased but as we know land area is limited on which the house can be build, as a result the price in this sector started raising. The interest rate also increased because of the increase in long run mortgage loan. This imbalanced all the scenario which was taking before recession. The recession occur, as the unregulated market situation in the money market started increased. As the housing debt decreased the consumer spending on other goods, as we know that demand in money market and goods market interrelated. So increase in interest rate , debt increased this results in increase in imbalance in balance of payment account as well. The reduction in demand for goods, results in decrease in income ,profit increase in unemployment rate and the starting of recession period. As after the globalization, the capital flows from one country to another, the economy are dependent on each other in terms of trade, so the recession in America spread all over the world and caused the global recession.