1. Aggregate Demand- Aggregate Supply

2. M*M* MdMd M r AE Y Y P MsMs Y=AE AD AS P* Y* r* Y** r** P** r*** M** Y Y Overall: Increase M S from M* to M** Decrease r* to r*** Increase Y* to full employment Y Increase Prices from P* to P**

4. Historical Recessions 1973 Oil Embargo – Quadrupling of oil prices (Negative Supply Shock) Spending on War – Positive Demand Shock Stock market crash – Negative Demand Shock Which shock drove the recession?

7. Historical Recessions 1981-82 Recession – Small recession in 1979 due to energy crisis – Iran limited oil exports, increasing price – Negative Supply Shock Savings and Loan Crisis – Problems in the mortgage market – Negative Demand Shock What was the overall outcome?

10. Historical Recessions 1990-91 Recession – 1990 Oil Price Increase (Negative Supply Shock)

13. Historical Recessions 2001 Recession – Dot-Com Bubble – 9/11 Attacks – Both (Negative Demand Shocks) – Expectation?

16. Great Recession Housing Market Crash

18. Great Depression