QUESTION
Assignment
Watch the Boom Bust Boom video. This video is also available through Amazon, Netflix, Vemeo and other streaming services. Rent the film Boom Bust Boom (Also the film your extra credit writing assignment is based on) Answer one of the questions about the film (1a - 1e). Make sure to identify which question you are answering. 1a. Describe how the 2008 financial crisis was connected to the mortgage market. Then describe how the 2008 crisis affected you or someone you know. 1b. Summarize what you learned about the many financial crises that were described in the film. Research one of the historical crisis mentioned during the Nathan Tankus segment in the film and discuss some policy responses to the financial crisis. (i.e. how did the government respond) 1c. Describe Minsky's financial instability hypothesis. Research Minsky's work on hedge, speculative and ponzi finance and summarize each type of debt structure.(Levy Institute) 1d. Write a paragraph explaining some of the problems with the neoclassical model discussed in the film. (Most of your textbook is based on the neoclassical model). Provide an example of how real markets do not fit the neoclassical model. 1e. Write a paragraph describing how students have responded to the 2008 financial crisis. What is the benefit of studying economics? How is a financial crisis different from the economic crisis caused by the pandemic? Pick a year between 1929 and 2007 not chosen by another student and: 2. List the rate of unemployment, output (GDP growth rate), and inflation rate in the economy in your chosen year and in the prior and successive years. Note that all the data you need for this is located below.. 3.Identify any specific shocks (supply, demand, positive, negative) that may have been affecting your chosen year. This may require outside research – if so identify your references. 4. Based on (1) and (2) above, what phase of the business cycle do you believe your chosen year was in? Explain your reasoning. You can find the data at Unemployment Rate by Year Since 1929 Compared to Inflation and GDP
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Answer
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Assignment
- Describe how the 2008 financial crisis was connected to the mortgage market. Then describe how the 2008 crisis affected you or someone you know
The 2008 financial crisis was arguably the worst economic disaster in the United States since the great depression. It started in 2006 when housing prices began to drop while many homeowners, with questionable credit were approved for mortgage loans. They also allowed banks to invest in the mortgage, which were so profitable that the banks decided to lend to even riskier borrowers. This unregulated instability in the mortgage market led to the instability. This affected me and many other people I knew in different ways. For instance, my parents – who had had a long thought plan of buying a home to settle in – became reluctant to do the same. This affected their financial situation in that period.
- Pick a year between 1929 and 2007 not chosen by another student and: 2. List the rate of unemployment, output (GDP growth rate), and inflation rate in the economy in your chosen year and in the prior and successive years.
Year
Unemployment rate
GDP Growth
Inflation Rate
1972
5.2%
5.3%
3.4%
1973
4.9%
5.6%
8.7%
1974
7.2%
-0.5%
8.7%
- Identify any specific shocks (supply, demand, positive, negative) that may have been affecting your chosen year. This may require outside research – if so identify your references
The high inflation and unemployment rates in 1973 was majorly caused by the fall of the Bretton Wood System after the Nixon shock of 1971 (Leeson, 2003). Furthermore, the 1973 oil crisis that increased oil demand due to the embargo that was placed by the Arab Nations increased the rate of inflation in the same year.
- Based on (1) and (2) above, what phase of the business cycle do you believe your chosen year was in? Explain your reasoning. You can find the data at Unemployment Rate by Year Since 1929 Compared to Inflation and GDP
The year 1973 was in the contraction cycle of the business cycle. I believe this because the year saw a slowdown in the pace of economic activity since the previous year had growth while the preceding year had fallen in terms of GDP. Furthermore, in 1974, the preceding year, the president of the nation resigned and minimum wage reduced. This insinuates that the economy was experiencing negative growth, which is the contraction stage.
References
Leeson, R. (2003). Ideology and the International Economy: The Decline and Fall of Bretton Woods. Springer.