The questions below are of a generic nature Essay

The questions be subaltern are of a generic temperament - Essay ExampleHowever, according to many experts the situation is not yet under control. The world is yet passing through the worst economic and monetary times. Stock markets are showing sluggish movements and belatedly there put one across been sharp decline in the international stock markets. Large financial institutions confirm collapsed which has been the biggest shock to the financial world. Rescue of these banks have involved huge amounts of money for bail outs. The government of the various(prenominal) countries have provided lump sum amount of money (that have run upto many trillion dollars in the United States alone) to these fai guide banks for rescuing them. In the United States the Federal Government has followed the Keynesian theory of economics. As recession unsex in, policymakers have not left the thrift to the forces of the market that might autocorrect the market and improve the condition of low aggreg ate demand. They have intervened with fiscal and monetary policy changes, so as to augment economic activities in the country. Interest rates were reduced as an immediate response to the crisis (Velde, 2008). This paper looks at the causes of the GFC and the responses of the government to this crisis. The main(prenominal) aim of this article is to research the protectionist activities of the governments in reflex to the harm caused to these economies by recessionary pressure. In this lightsome the preventive measures of the governments have been studied to understand the course of action adopted by the global economy to prevent the recurrence of a situation similar to the Great Depression of the 1930s. Causes of the GFC The causes of the GFC are manifold and analysts have not come to any particular agreement about the actual reasons that have eventually led to the financial crisis of such a huge dimension. Yet it is commonly agreed that GFC has occur due to the combine effect of the shocks faced by the real estate market in the United States and the European countries on one hand, and the increasing assay premia for the unified firms and the investment banks on the other (Stoeckel, 2009). The shocks in the global financial market have potentially created strong contractions in international trade. The root to the financial crisis can be traced to the collapse of a number of queen-sized and influential financial institutions in the United Sates and the Europe. Among them, the most notability mortgage bank failures are Lehman Brothers, Northern Rock and Bear Sterns. As these banks filed for bankruptcy, a wave of stay ran through the most established financial markets of the western world. In this situation, banks curtailed their lending facilities to other banks which increased the risk premium on interbank borrowing. This rate increased steadily from near 0 to 5 per cent. On corporate bonds this risk increased to more than 6 per cent. In spite of effort s by the government to increase fluidity levels in the market, the financial markets crashed inevitably. The economic slowdown started with the shelving of big corporate projects. Therefore, the primary borrowers in the economy (i.e., the large corporate firms) stopped lending money from the banks. On other side of the coin, obtaining credit for commercial purposes became difficult. This causes the not bad(p) financial crisis. Since credit facilities dried up, corporate firms had to revise their investment decisions. They faced a