QW/RA 3: Policy Response to a Macro Shock

• The Great Recession was the most serious economic downturn in U.S. history since the Great Depression (we will wait to see about the Covid drop). The recession began in December 2007. Interest rates at the time were very low, close to zero. Despite the American Recovery and Reinvestment Act of 2009, a nearly $800 billion fiscal stimulus and an expansionary monetary policy, the economy is only now getting back to normal in 2015.

• In retrospect, what set of macro policies (fiscal and monetary), if anything, should we have conducted to achieve a better recovery? Show using the AD/AS model and explain your reasoning. Would some of the responses have been better than others? Why or why not?

Take care your time, no rush, would really appreciate your help