History of the financial crisis: Watch episode 2 of "Money Power and Wall Street" from the beginning to 32:50 (you can skip from 10:50-17:50 if you would like).
Which investment bank was bailed out in 2008? Explain the concept of systemic risk and how it connects to this bailout?
Which investment bank was allowed to fail in 2008? Explain the concept of moral hazard and how it connects to allowing this bank to fail.
What was the impact of the failure of this major investment bank on Aggregate Demand? Your answer should connect to M ?+v ?.
In 2008-2009 the U.S. was in a deep recession and the tools of monetary policy had been used in an attempt to end the recession. Despite these efforts unemployment was above its natural rate and real GDP growth was below its potential rate.
Describe how should congress respond to this scenario using Fiscal Policy?
Draw an Aggregate Demand/Aggregate Supply graph to demonstrate the effect of this policy.