ECON101 Mission College Economics Fiscal Policy Video Analysis

1. According to Keynesian economists, the cause of the 2008 recession was the decrease in aggregate demand that initiated with the collapse of the real estate market at the end of 2007.

Please first watch the following video and read the following articles, and discuss how the real estate market crash affected the aggregate demand components (especially Consumption and Investment ) and as a result triggered the most severe recession since the Great Depression in 1929. Use the AD/AS Model in your explanations (Remember that AD components are C, I, G, (X-M). How did the changes in these components shift AD?)

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