Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Chapter 15, Problem 7E
To determine
"The popular
Assess this statement in according to the emergence of the three theories.
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Use the conversation part to answer (B) part.
ALEX: Hi, Becky. I’m intrigued to see how macroeconomics allows us to explain recent economic events such as the Great Recession that affected so many people. But there’s one thing I don’t understand. Was the collapse of the housing bubble the only cause of the recession, or were there other factors as well?
BECKY: Hi, Alex. I agree that macroeconomic theory offers an entirely new perspective on how the economy works. To answer your question, the crash of the housing market was a major factor but not the only cause of the Great Recession. The professor mentioned that the __________ (options: financial, fiscal, government) system deteriorated as well, an event that deepened the economic downturn even further.
ALEX: I see. So the bursting of the housing bubble caused the initial decline in aggregate demand. Then the financial crisis caused aggregate demand to decline even more. Could you also help me understand how to use the aggregate demand…
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