Answer Happy

Essay 1. While there was a lot more to it, a key part of the 2008 recession was the bursting of a housing bubble. As houses dropped in value, many individuals found their net wealth had been reduced. In response to the crisis, there were a number of economists who argued that the government should not intervene, and that the economy would self-correct once prices adjusted. There were also a number of economists who argued that price adjustments would not be sufficient to correct the problem, and that such price adjustments might actually make matters worse. In a brief essay, use the IS-LM model to I a. Explain how falling housing prices can generate a recession b. Explain why certain economists argued that price adjustments would be sufficient to return the economy to its long run equilibrium. C. Explain why certain economists argued that price adjustments would exacerbate the crisis.