Whenever the economy goes into recession (as occurred most recently in 2008), consumption in the United States decreases.
A) If the economy went into a recession, but you were not directly affected, do you think you might change your consumption patterns/choices? Do you remember if you or your family changed your spending habits at all during or after the 2008 recession?
B) Following the recession of 2008, the rate of savings in the United States doubled. Why do you think this is? How do you think the increase in savings affected overall consumption? Since, on average, 70% economic activity in the United States is based on consumers (just like you) purchasing goods and services for consumption, how do you think the increase in savings affected aggregate expenditure? Think about “The Paradox of Thrift” as described in your textbook.
Please respond to these questions using your understanding of the aggregate expenditure model.