Unit 4 discussion topic 2 – policymaking

Instructions

The Great Recession was the most serious economic downturn in U.S. history since the Great Depression.  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, if anything, should we have conducted to achieve a better recovery?  Show using the AD/AS model and explain your reasoning.  Be sure to address the arguments favoring active versus passive policymaking as they relate to your discussion.

Where appropriate, cite examples from your text or other readings.

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