Macroeconomics Paper

1224 words - 5 pages

Economic crisis
Professor Yeaman
ECO 2013 - 526381
04 December 2015

Economic Crisis
The increase rate of expenditure and relatively low income has led to inequalities that give rise to the economic and financial crisis. In this case, the policies to address the factors causing the inequalities are not made in an efficient and effective manner. Factors like the unequal and inefficient resource distribution have not been made clear from 2008 onwards. Various interventions to address the current economic and financial crisis should be put in place. This discussion is going to explain the reliable predictors for financial and economic crisis and ...view middle of the document...

The percentage of gross domestic production (GDP) is also affected by the high rate of appreciation of the currency resulting to stiff competition externally which makes the sector vulnerable to the crisis.
The factors that increase the vulnerability of a nation or a sector to the crisis also suggest an economic crisis ahead. The factors are the weak public, domestic and financial sector that increases the vulnerability of the currency to the crisis. The GDP growth rate and the inflation rates indicate the financial and economic crisis to a domestic sector. In this case, the overvaluation increases the probability of crisis occurrence. The indicators give a clear way of the steps to be taken to curd the crisis and avoid its adverse effects. Despite the lack of adequate data in the banks, the above indicators can signal the crisis and so the decision makers can be able to make the necessary decisions to address it (Kaur, 2015).
The achievements and pending issues in the context of global crisis
The risk of wage deflation was also pointed out in 2009 to address the problem of employment and wage cut globally. Also, there was the paralysis of the interbank credit and the issue of the systemic collapse of the financial systems (Suarez, 2010). The authorities in the monetary sector also succeeded in the reduction of interest rates to low levels. They also assisted the banks in various forms like the capital injections and loan guarantee that helped in addressing the issue of economic and financial crisis
The process of recovering economy has been practiced by the government at a faster rate. Firstly the government was able to substitute the private debt that had initially come to a standstill with the debt of the public as a result of the crisis. The government put up measures to cut the higher spending and discretion of tax which resulted in a correction of higher spending. Also, there were various attempts to avoid the inward solutions that would aggravate the collapse of the trade and demand for the economies dependent on the exports alone (Suarez, 2010).
The pending issues in the global context in consideration of economic and financial crisis are the sustained lack of data. There is no accurate data stating the state of the economy and domestic growth in the banks, the problem here is the lack of transparency and greater risk due to mismatch of information. This poses a lot of challenges in that it makes the whole process of decision making more complex and uncertainty, ignorance also of the urge to get the correct data leads to poor and ineffective decision making that eventually leads to an economic and financial crisis (Elson, 2015).
The operation of money market...

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