2008 Financial Crisis 2008 Research Paper
The financial crisis of the year 2007 and 2008 which is also known as the global financial crisis is mainly considered by economist to be the world worst financial crisis since the great depression period of in the 1930s. The crisis made economist and financial experts rethink monetary and fiscal policies. During this crisis, the government, economists and financial experts and other policy makers became victims of the unforeseen crisis. This study will investigate what monetary policies and fiscal policies caused the crisis. The paper will discuss the effects of implementation of both the fiscal and monetary policies in reaction to the crisis. Lastly, it shall evaluate whether the solutions worked …show more content…
This led to high bank rates imposed by the federal government. The federal research took much money from the circulation making the money in circulation to be lesser. Due to the increased bank rates, people stopped borrowing money from the banks (Claessens, & International Monetary Fund, 2014). The unfinished projected remained unfinished. The growth of the economy slowed down due to characterized low purchasing power among the people in the entire world and more so in the United States. Based on the statistics taken the currency slowed from 6.7% to about 2.6% from 5.1 to about 0.3% and the monetary based from 6.4 to 2.2%. As a result, the slower growth in money made the currency dollar also to slow down. This happened from the second quarter of 2006 to the third quarter of the year. On the other hand, the dollar spending also went down showing that the spending was also …show more content…
However, after the rise of the rates, there was an immediate stop to borrowing that ensured no additional money was injected into the system. It would become easy to control the funding when they were no additional amounts this ensured that the long-term solution was slowly being achieved (Wolf, 2014).
What fiscal policies caused the crisis?
The fiscal stimulus where the government borrows money to boost its spending this has a toxic effect on the economy. With fiscal policy, there is a high unemployment due to increased government debt and deficit. This is because there will be no finances to pay the workers. Currently
, the US government is in great debt due to the ongoing high government spending. High government spending results in inflation as the stock markets and money markets will have increased (The United States, 2011).
What were the effects of the fiscal policy implementation in reaction to the