Illustrate and explain what is meant by a liquidity trap, and analyse how the 2007/8 financial crisis may have pushed many rich countries into this situation. What factors led to a gradual recovery?
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Illustrate and explain what is meant by a liquidity trap, and analyse how the 2007/8 financial crisis may have pushed many rich countries into this situation. What factors led to a gradual recovery?
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- What’s the difference between a liquidity crisis and a solvency crisis? When Lehman Brothers went under, its debts (liabilities) were much greater than its assets. Did Lehman Brothers experience a solvency or a liquidity issue?Why do credit spreads risesignificantly during a financial crisis?What is a liquidity crisis?
- Explain how each of the following helps to stabilize the financial system: deposit insurance, capital requirementsDraw an expanded version of Figure 18.1 (the outline of a typical financial crisis on page 554) for emerging economy crises. Your chart should include capital flight and show how this phenomenon and its consequences interact with the other elements common to a financial crisis.Explain the events that transpired in the 2008 financial crisis.
- What are the causes and impact of financial crisis 2007 – 08 on world economy with special reference to the Indian economy.From the IMF Working Paper about Global Financial Crisis briefly explain one of the alternatives:a) Marginal Loans and Systemic Riskb) Financial Integration and InterconnectednessRead the following premise carefully and answer the questions specifically and in detail: "Financial institutions such as banks, mortgage companies and finance companies serve as intermediaries between those who have a surplus versus those who have a deficit creating a capital injection market." Explain in detail the function of the financial market and its influence on capital injection. Analyze the responsibility of the financial system in the demand for investment versus the supply of savings.