The essay topic is:
From a spending model perspective, explain the causes and dynamics of a recession.
Make sure to:
– consider that recessions seem to demonstrate that expenditures and incomes depend on each other. If markets do not self-adjust, consider how a decline in spending can lead to a negative process that ruins an economy?
-(Consider implications of gaps in the “Keynesian Cross” and/or the “Aggregate Demand/Aggregate Supply Diagram” to illustrate your points.)
– Aggregate Demand/Aggregate Supply Diagram brief introduction (make your own research if you must)
– Keynsian Cross Brief introduction (Make your own research if you must)
Hints — Within your answers, consider the following:
–Identify and summarize the market dynamics triggered by changes in leakages and injections.
–How do measures like GDP, unemployment, and inflation play out in the different scenarios?
–How do propensities and multipliers, and even expectations affect the outcomes in a downturn?
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