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Final Essay Preparation
The “Great Recession” of 2008
Final AP Essay
1. Briefly discuss the major economic challenges facing the USA.
2. Analyze 2 important solutions to the structural problems facing the USA which will help it prosper in the 21st century
80 points40 minute college level essayUse at least 2 AP Econ Graph in your essay
Speculative Bubbles
Holland 1634 - 1637
1996 - 2000USA 2002 - 2007
Economy 2000 - 2012
Caused by
Credit Bubble
Led to
1996 - 2000
U.S. Economy in 2012
AD1AD1
LRAS1PriceLevel
RealGDP
SRAS1LRAS1PriceLevel
RealGDP
SRAS1
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P1
Q1
E1
Major Economic Challenges
1)
The American Dream?
http://www.npr.org/2012/05/29/153513153/american-dream-faces-harsh-new-reality
New Labor TrendsOver the past 15 years Labor has significantly changed
Globally:Globalization: “free trade” with other countries
Collapse of Soviet Union & Communist EconomiesChina & India emerge as economic powers (GDP growth > 10%)
European Union forms common currency (now what?)
Worldwide free flow of financial capital & labor (financial crisis)
United States: Unions are declining in power Less “Job Security” Declining Manufacturing Jobs Rising Demand for Educated Workers
↑ Gap between Rich & Poor
Bottom 20% Top 5%
Income Distribution
+56.0%+ 1.0%Change:
The pay gap widens in USA!
Qty
D1
S1
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Q1
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Low-Skilled Labor
Qty
D1
S1
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Q1
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College Educated Labor
Qty
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S1
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College Educated Labor
D2
D2
Top 1%
Great RecessionSlow Recovery
Slow Job Growth---Declining Labor Force Participation
GDP GDP GDP
What creates real economic growth?
AD1AD1
LRAS1PriceLevel
RealGDP
SRAS1LRAS1PriceLevel
RealGDP
SRAS1
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E1
Keynes vs. Hayek
• http://www.youtube.com/watch?v=GTQnarzmTOc
Animal Spiritsversus
Malinvestment
What Good Are Economists Anyway?
Economic Solutions?
Inside Job
FNMA & FHLMC
Government takeover
AIG Insurance Company
Government Takeover
Wall Street Firms Bankrupt or Bought
Bear StearnsMerrill LynchLehman Brothers
Current Problem
Gov’tTakeover
