The impact of the financial crisis of 2007 on the USA economy

Prepared By Team 1

Macroeconomic Variable's

GDP

Unemployment
Inflation Exports and Imports

GDP
Government Revenue & Expenditure Real Estate Industry The Loss of Investors Confidence Consumers Cut Spending

GDP R Square 39%

Standard Error Before the crisis

Effect of the crisis P-value Mean Equation

0.01740197 3.20%
-2.50% 6.70% 2.15% y=3.2%-2.5%x+1.7%

Unemployment
Unemployment & Crime association

Effect on Oil Prices

Shifting Job Risk

Unemployment
R Square Before the crisis Standard Error Effect of the crisis p-value Mean equation 40% 5% 0.015876006 2% 3.50% 6.37% y= 5%+2%X+1.5%

Inflation
Least affected of Macroeconomic variables U.S pursuing GDP targeting strategy No Guarantee for long-term stability

Inflation R Square Standard Error Before the crisis Effect of the crisis p-value Mean Equation 25% 0.01239097 2.60% -0.30% 64% 2.50% y= 2.6%-0.3%+1.2%

Government Efforts
Increase Government Spending

Banks withdrew reserves to increase liquidity

Tax Cuts

Government Stimulus Package

On Tuesday Feb. 17, 2009 US President signed into law a
$787-billion stimulus package:

Providing $288 billion in tax cuts and benefits for millions of

working families and businesses

Increasing federal funds for entitlement programs, such as

extending unemployment benefits, by $224 billion

Making $275 billion available for federal contracts, grants

and loans

The federal reserve action

influence the demand of goods and services, by
adjusting the short-term funds rate.

instituting measures that increase harmony in the

banking sector.

Make it possible for any financial institution that

requires liquidity to access credit directly from the Fed

increased credit facilities.

Results of the federal reserve action

Positive results:

1-reducing the funds rate, which stood at 4.25% in

2007, fell to 0% at the end of 2008.

2-have eased credit crisis. 3-Feds credit facilities has realize increases in its
balance sheet, which increased to over $2 trillion in 2010.

Results of the federal reserve action

Negative:

banks didn't lend out the money they borrowed from

the fed but invest it in profitable areas such as government bonds which decreased liquidity even further and made the continuation for the reduction in consumption even worse.

Conclusion
financial crisis caused by greed and irresponsibility

The decrease in the price of oil affect economies of

countries that depend on it

the crisis was very wide and it affected not only USA
but the entire world effected due to the influence of us economy

End
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