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The impact of the financial crisis of2007 on the USA economy

Prepared

By

Team 1

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Macroeconomic Variable's GDP

Unemployment

Inflation

Exports and Imports

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GDP

Government Revenue & Expenditure

Real Estate Industry

The Loss of Investors Confidence

Consumers Cut Spending

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GDPR Square 39%Standard Error 0.01740197Before the crisis 3.20%Effect of the crisis -2.50%P-value 6.70%Mean 2.15%Equation y=3.2%-2.5%x+1.7%

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Unemployment

Unemployment & Crime association

Effect on Oil Prices

Shifting Job Risk

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Unemployment

R Square 40%

Before the crisis 5%

Standard Error 0.015876006

Effect of the crisis 2%

p-value 3.50%

Mean 6.37%

equation y= 5%+2%X+1.5%

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Inflation

Least affected of Macroeconomic variables

U.S pursuing GDP targeting strategy

No Guarantee for long-term stability

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

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Government Efforts

Increase Government Spending

Banks withdrew reserves to increase liquidity

Tax Cuts

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Government StimulusPackage

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 ofworking families and businesses

Increasing federal funds for entitlement programs, such asextending unemployment benefits, by $224 billion

Making $275 billion available for federal contracts, grantsand loans

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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 thatrequires liquidity to access credit directly from the Fed

increased credit facilities.

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Results of the federal reserveaction

Positive results:

1-reducing the funds rate, which stood at 4.25% in2007, fell to 0% at the end of 2008.

2-have eased credit crisis.

3-Feds credit facilities has realize increases in itsbalance sheet, which increased to over $2 trillion in

2010.

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Results of the federal reserveaction

Negative:

banks didn't lend out the money they borrowed fromthe fed but invest it in profitable areas such as

government bonds which decreased liquidity evenfurther and made the continuation for the reduction inconsumption even worse.

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Conclusion financial crisis caused by greed and irresponsibility

The decrease in the price of oil affect economies ofcountries that depend on it

the crisis was very wide and it affected not only USAbut the entire world effected due to the influence of useconomy

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End

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