Question

Figure 17.26 depicts the US aggregate demand between 2006 Q2 and 2010 Q4. Based on this information, which of the following statements is correct? Consumption Residential investment Non-residential investment Government consumption and investment Net exports Recession Contribution to real GDP growth (percentage points at annual rate) -1.8 Onset of the crisis: 2006 Q2-2007 Q4 Crisis: 2008 Q1-2009 Q2 Recovery 2009 Q3-2010 Q4 o In the recession, not only did households stop purchasing new houses and other consumption goods, but also firms stopped investing. The fall in residential investment was the sole cause of the financial crisis. . Government consumption and investment have been supporting economic growth throughout the period considered. o Household consumption and residential investment recovered promptly since the end of the crisis.

Answer 1

Answer is option A)

D is false, bcoz household Consumption did promptly recover, but not the residential investment

C is false, only Government consumption was supporting , bcoz investment was negative in recession

B is false, fall in residential investment was one of the most important reason of financial crisis, but not the sole reason

A is true, bcoz in recession, C, I( residential & non residential investment) was negative