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Evaluate the global responses to the financial crisis. Give examples

Evaluate the global responses to the financial crisis. Give examples

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Answer #1

There was a massive fall in investment activities during the financial crisis. Investors were suspicious about the future expected returns, thus they reduced the investments.

The government acted by swiftly to moderate the adverse impacts of the financial crisis:

  • Central banks of the world reduced the interest significantly to drive up investment activities.
  • The government used fiscal policies actively. Taxes were reduced and the expenditure levels were increased.
  • Bailout packages were announced to fund the flagging financial institutions.

TARP was the biggest program of US government. Many firms were rescued through the bailout packages.

These actions globally led to the rise in aggregate demand once again. Thus the situation of demand got corrected across the world. Eventually, the economies began to improve.

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