Between 2007 and 2009, the United States experienced a severe financial crisis and economic downturn commonly known as the Great Recession. Starting in 2006, housing values fell 30%, causing losses in mortgage-backed securities for families and financial institutions. The recession was marked by a drop in aggregate demand that caused a decline in GDP and an increase in unemployment.

• How did the AD/AS equilibrium change over time? Support your claims by referring to your AD/AS model.
• Select an economic factor (GDP, unemployment, price level) and explain what impact any shifts in AD or AS (or both) had on your chosen factor.