Okay, continuing on in Unit 12, this is Lesson Two. We're going to discuss how  the you know the crisis from the housing market kind of grew into the aggregate  economy as a whole. The aggregate expenditure model takes as its starting  point the fact that GDP measures both total spending and total production.  When planned and actual spending are in balance, real GDP equals planned  spending, which equals autonomous spending plus marginal propensity to  spend times the real GDP. Okay, let's break this down. Autonomous spending is  the intercept of the planned spending line, this is how much we're going to  spend. Period. It is the amount of spending that there would be in the economy  if income were zero. The equilibrium level of real GDP is as follows. The  framework tells us that a reduction in autonomous spending leads to a decrease in real GDP. So just as in the Great Depression, the two leading candidates for  the decrease in autonomous spending are consumption and investment.  Specifically, the crisis in the housing market had two significant implications for  the rest of the economy. First, the decrease in the housing prices started in  2008, and this reduced the wealth of many households. Because households  were poor; they reduced their consumption. Second, the disruptions in the  financial system made it difficult for firms to obtain financing. Banks were locked  down, which meant that there was less investment, so they couldn't grow. Banks weren't lending; people couldn't borrow; they couldn't grow. The aggregate  expenditure model teaches us that these reductions in consumption and  investment can lead to a reduction in real GDP. So reductions in autonomous  spending are magnified through the circular flow of income. As spending  decreases, income decreases, leading to further reductions in spending. This is  the multiplier process. It shows up as the term one divided by one minus  marginal propensity to spend, which multiplies autonomous spending in the  expression for real GDP. One of the priorities of the Obama administration, after  taking office in January 2009, was to formulate a stimulus package to deal with a looming recession, as is clear from the table state of the economy growth rates  from 2006 to 2010 in your text, growth in the economy was near zero for the  preceding year, and the unemployment rate was much higher than it had been  in the previous two years. Although the financial rescue plans of the George W.  Bush administration may have stemmed the financial crisis, the aggregate  economy was now limping along at best. So, the American Recovery and  Reinvestment Act of 2009 was signed into law February 17, 2009. The stimulus  package contained approximately 800 billion in spending increases and tax cuts, these numbers are approximate for a couple of reasons. One, parts of the  package depend on the state of the economy in the future, so the exact outlays  are not determined in this legislation. And two, the disbursements were not all  within a single year, so the timing of the outlays and thus their discounted  present value could not be precisely known at the time of the passage. The  stimulus package contained a mixture of spending increases and tax cuts. 

According to the Congressional Budget Office, from November 2009, federal  government purchases of goods and services were increased by about $90  billion over the 2009-19 period, transfer payments to households were set to  increase by about 100 billion, and transfers to state and local governments were to increase by nearly 260 billion. The last category of outlays was quite visible,  taking the form of road projects and other construction in towns across the  United States, interestingly, the federal government was investing in  infrastructure, thus building up the public component of the capital stock. 



पिछ्ला सुधार: गुरुवार, 8 अक्तूबर 2026, 9:55 AM