Aggregate Demand and Supply Discussion Responses

I don’t understand this Economics question and need help to study.

Respond to these 3 posts. Each response should be 80 words or more. Share your opinion on each posts’ topic. (You are responding to the person who wrote the post)

POST 1: One event in the USA that led to the shifting of the country’s AD curve and SRAS curve was the financial crisis and deep recession that lasted from December 2007 to June 2009. The effects of housing bubble and subprime mortgage crisis impacted the GDP of the US. This resulted to a shift of the Aggregate Demand curve to the left. The level of output was low during the time and was below the full employment level, therefore resulted to increased unemployment. Another event that could lead to a shifting of the country’s AD curve and SRAS curve is the recent increase in the value of S&P 500 stocks. When stock prices are high, people tend to feel wealthier, consumers are more likely to spend money and make major purchases such as homes and cars. This could result to higher sales and earnings for businesses which means increase in GDP and price level, thus shifting the AD curve to the right.

POST 2: A real world example of something that has changed in China that led to the shifting of their Serve Acute Respiratory Syndrome (SARS) curve is a disease like pneumonia that made a break though to the world in 2002. The World Health Organization made the whole world aware of the illness and it released a travel advisory. The advisory was a recommendation to people to not travel to Hong Kong and Guangdong. Furthermore in the following months more parts of China and some of Canada were also advised. However by the end of the following month all of the advisors were gone by the World Health Organization. Some economists from Peking University’s China Center for Economic Research worked on finding the estimate of the overall impact of SARS on the Chinese economy in 2003 by doing doing a survey of Beijing’s tourism industry. The study showed that China’s tourism sector would lose 16.8 billion dollars. 10.8 billion dollars derived from about half of the reduction in foreign tourist revenue. The 6 billion dollars came from domestic tourism due to vacations being cancelled. In order to conclude the entire impact of SARS on China’s economy, there was a slight debate wether the multiplier for tourism revenue in China was between 2 and 3. Due to the SARS only breaking out after March, a smaller multiple was assumed of 1.5 for all of 2003. The prediction was that China’s economy would decrease by 25.3 billion dollars in 2003 due to SARS according to Case in Point: The Multiplied Economic Impact of SARS on China’s Economy.

POST 3:The recession in the U.S. in 2008 caused unemployment rate to rise to 10% high, where right now it is at a 3% low. This unemployment rate could cause households to lose an income or assets that cut their wealth in half, or worse. When the value in households fall, the level of wealth falls, and therefore consumption in households fall. The Aggregate Demand could be affected by several changes in Consumption, government spending, net exports, or investment, and in this case consumption is affected. When the wealth of households decrease, their consumption decreases too. This shifts the Aggregate Demand curve to the left as aggregate demand falls.