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a. based on the functions of the banking system, give reasons why governments bail out banks during an economic crisis
b. is the world heading for recession? explain the conditons under which the world can be classified as being in a recession as COVID- 19 persists. Explain linking the pandemic to the various stages of a recession
Step by step
Solved in 2 steps
- a. Based on the functions of the banking system, give reasons why governments bail out banks during an economic crisis? [Not more than one-page] b. Is the World heading for a recession? Explain the conditions under which the world can be classified as being in a recession as COVID-19 persists. Explain linking the pandemic to the various stages of a recession. [Not more than one-page]You read a news story blaming the central bank for pushing the economy into recession. The article goes on to mention that not only has output fallen below its potential level, but that inflation has also risen. If you were to respond defending the central bank, what argument would you make? Explain in detail.Is the World heading for a recession? Explain the conditions under which the world can be classified as being in a recession as COVID-19 persists. Explain linking the pandemic to the various stages of a recession.
- Which type of event started the financial crisis in 2007-2009? A. Stock market crash B. Foreign exchange devaluation C. Increase in uncertainty after failure of a major institution D. Credit boom and bustGive reasons why governments bail out banks during an economic crisisThere are claims that the central bank caused the recession, and due to them, production has dropped below the optimum level, and inflation has gone up. What would you say to defend the central bank? Explain in detail.
- The central bank of a country is having trouble with its economy, and the financial market wants to know what you think should be done. The bank cut its policy interest rate to the effective lower bound, which wasn't low enough to stabilize the economy.What would you tell this central bank to do, based on what the Federal Reserve did during the financial crisis of 2007–2009?American International Group (AIG) stood at the centre of the financial crisis of 2008. It was one of the main institutions issuing credit default swaps. With default rates increasing and the economic climate worsening, it found itself in liquidity problems. AIG was forced to seek a government rescue and was effectively nationalised. Shortly after the bailout in 2009, it also become the centre of a media firestorm in the so-called AIG bonus payments controversy. Questions:1. Critically evaluate the factors leading to AIG’s liquidity problems, bailout, and nationalisation. 2. Critically assess the reasons and judgment behind the AIG bonus payments controversy. Write a short essay imagining what would have happened if AIG hadn’t been saved.All other things being equal, which of the following would cause interest rates to rise? a. The economy slides into a recession. b. The federal government's budget deficit declines. c. The rate of inflation decreases. d. The Federal Reserve contracts the money supply.
- Regarding the 2007-09 Financial Crisis, answer the following questions: Was this a systemic or a nonsystemic crisis? Explain. How do these differ? Which of the following shocks played a role in the crisis: (a)Increased uncertainty (b)Increase in interest rates (c)Government fiscal problems (d)Balance sheet deterioration (e)Banking problems and panicsWhat impact of the recession on Capital Markets in Malaysia? (it is a general question about recession - causes by Covid 19) Instructions: Answer in 3 sentencesSuppose you are the governor of the Bank of Canada, and the economy is experiencing a recession, what changes in (a) open market operation and (b) overnight loan rate and bank rate would you consider? Explain in each case how the change you advocate would affect chartered bank cash reserves and influence the money supply.