How the Financial Crisis of 2008 Caused Macroeconomists to Rethink Monetary and Fiscal Policies

1865 Words Jan 10th, 2018 8 Pages
However, the US government presented monetary and fiscal policies to ensure the economy move towards the economical developmental track for the country. Such policies have been discussed in the research paper to aid with the understating of the reasons of the financial crisis and the effort the government put in to recover from it.
Introduction
The financial crisis of 2008 was the key element which resulted in the depression that the globe is immersed in today. It was astonishing to see that a crisis in the American housing market can initiate an economic depression with effect ranging so far and wide, that it threatened the global economy. Often it is compared to be as large and impactful as The Great Depression of 1930's. The credit crunch resulting from the liquidity problems of the major market players created an atmosphere of utmost distrust amongst the investors regarding the financial institutions in place.
The crisis has its roots in the American housing market, when its mortgage dealers began handing out home loans to borrowers with not a very convincing credit history, and would otherwise be declined a home loan. These loans came with terms that dictated the…