The US economy experienced a recession and a financial crisis at the end of the last decade. In the previous project we looked at causes originating in the real economy as described by components of the aggregate demand. In this project you are asked to critically assess the events taking place in the financial markets and the monetary and fiscal policies instituted in the wake of the crisis.To guide your thinking, you might consider the following questions: What were the main causes of the financial crisis of 2008?What is the role of monetary and fiscal policies?? How about after the onset of the crisis? Was the response of the FED to the crisis effective? Was the fiscal stimulus effective? Did monetary and/or fiscal policies improve economic conditions? With the benefit of hindsight, did these policies have unintended consequences?

Use the AS-AD model to explain how the sudden decline in investment and consumption (hint: this is equivalent to a decline in demand) which we have studied in the previous project on the 2008 recession, affected output and prices(which curve shifts, AS or AD?). Next, explain using the AS-AD model which monetary policy and fiscal policies were implemented in the wake of the 2008 events and how did they work (which curve shifts and what were the effects on output and prices? How about the interest rate unemployment and investment?).