BCO124 Macroeconomics: Effects of 2008 Economic Crisis in France

This report analyzes the impact of the 2008 economic crisis on the French economy. It begins by outlining the crisis's origin and global spread, followed by an examination of key macroeconomic indicators: GDP, inflation, and unemployment. The report presents the trends of these indicators, including pre-crisis levels, the sharp declines during the crisis, and subsequent recovery. GDP growth rates are calculated and analyzed, with explanations of the fluctuations and influencing factors. The report employs the AD-AS model and the circular flow model to explain the crisis's effects, focusing on the decline in aggregate demand and the impact on GDP and price levels. Finally, it offers policy recommendations, including structural and labor market reforms, along with expansionary monetary policies to stabilize economic growth and recover price levels. References from academic sources support the analysis.

Macroeconomics
Name of the Student
Name of the University
Course ID

Introduction
• World economic crisis
• One significant economic event
• Started in 2008
• Subprime mortgage crisis
• Originated in United State
• Spread over other countries
• Impact on France

Trend of Macroeconomic
Indicator
• Gross Domestic Product
• Increased steadily from 1999 to 2008
• Sharp fall in 2009
• 2592.08 billion dollars
• Recovered since 2010
• 2924.903 billion dollars in 2018
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2200
2300
2400
2500
2600
2700
2800
2900
3000
Gross Domestic Product
Year
GDP (in billion)

Trend of Macroeconomic
Indicator
• Inflation
• Movement of price level
• Around 2% before crisis
• Sharply decline to 0.09% in 2009
• Started to recover
• Dropped to the lowest level in 2015
• 0.04% and gradually recovered thereafter
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
0.00
0.50
1.00
1.50
2.00
2.50
3.00
Inflation
Year
Rate of Inflation

Trend of Macroeconomic
Indicator
• Unemployment
• State of labor market
• Gradual decline in pre-crisis period
• Lowest in 2008 (7.06%)
• Hit of the crisis
• Increase in unemployment
• 9.06% in 2018
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
6.5
7.5
8.5
9.5
10.5
11.5
12.5
Unemployment
Year
Rate of Unemployment

Pre and Post Crisis
Comparison
Pre-crisis (1999-2008) Post-crisis (2009-2018)
2300.00
2350.00
2400.00
2450.00
2500.00
2550.00
2600.00
2650.00
2700.00
2750.00
2800.00
2475.41
2751.28
Average GDP
Period
GDP in Billion dollar
Pre-crisis (1999-2008) Post-crisis (2009-
2018)
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
2.00 1.77
1.02
Average Inflation Rate
Period
Rate of Inflation
Pre-crisis (1999-2008) Post-crisis (2009-2018)
8.4
8.6
8.8
9.0
9.2
9.4
9.6
8.84
9.49
Average Unemployment Rate
Period
Rate of Unemployment

Trend in Economic Growth
• Economic growth
• Percentage change in GDP
• 1.98% growth in 2001
• Two consecutive year of decline
• 2.83% in 2004
• Negative growth rate in 2009
• -2.87%
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
-4.00%
-3.00%
-2.00%
-1.00%
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
GDP growth rate
Year
Growth rate of GDP (%)

Explanation of Growth Trend
• Fluctuation in growth
• Domestic and global economic factors
• New currency adaption
• Growth lowered between 2001 to 2003
• Financial crisis of 2008
• Consumption, investment, inventory and export fall
• Fall in aggregate demand and growth
Pre-crisis (1999-2008) Post-crisis (2009-2018)
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
2.09%
0.93%
Average Growth Rate
Period
Rate of Growth (%)

Explanation of Growth Trend
• AD-AS model
• Crisis affected different components of GDP
• Decline in aggregate demand
• AD shifts inward
• GDP and price level contracts.

Circular Flow Model
• Circular flow model
• Economic downturn
• Cut in tax
• Increase in spending

Circular Flow Model
• Decrease in tax to household → Increase in disposable
income →Increase in consumption expenditure →Product
market→ Revenue of firm→ Cost of resources →Resource
market → Money income to household → Increased demand.
• Increase in government expenditure → Product market →
Revenue of firm→ Cost of resources →Resource market →
Money income to household → Increases demand.
• GDP and price level increases and unemployment falls.

Policy Recommendation
• Downturn in economic growth
• Policies to stabilize growth
• Structural reform
• Labor market reform
• Price level recovery
• Expansionary monetary policy