Global Economy : Global Economic Crisis

1249 Words Apr 24th, 2015 5 Pages
Global Economic Crisis
Introduction
Trade among countries has been an important accelerator of economic growth. It has created employment opportunities for many people in the world. However, due to this trade-like financial openness the economy is exposed to external shocks.
In 2008, the U.S.-originated financial turmoil threatened the global capitalist system. All countries in the world were affected. The repercussions of the turmoil widespread around the globe resulted in various issues in the economies; the real sector contracted, unemployment levels rose, and commodity prices decreased. The economies hit the hardest experienced sharp reduction in stock prices and rates of exchange.
The quick spread of the U.S. financial problems to the other countries was facilitated by the interconnectedness that exists in the global economy in terms of trade, finance and investments. Global responsibility principle is in general recognition with the Korean crisis. The principle was talked about and left to the United States after the Mexican financial crisis.
The economy has remained sluggish after the crisis since recovery of the jobs lost has not yet been achieved.
Causes of the crisis
Korea was hit so hard by the fact that it had been financing long-term investments using short-term loans. This is the violation of the cardinal rule taught in economics. It is recommendable that long-term loans should be matched with long-term liabilities. It failed to report short-term debts. The…
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