StudentShare solutions
Triangle menu

World Finacial Crisis - Impact in the American Economy - Term Paper Example

Not dowloaded yet

Extract of sample
World Finacial Crisis - Impact in the American Economy

From the year 2006 the delinquency rate on the home loan has increased and it got severe in the year 2007 because the Federal Reserve has started to increase the interest rates. The house loan where the debtors have to pay floating rate interest they were in problem. So the increase of bad loans led to the failure of the mortgage lenders mainly the banks. Because of the complexity of the financial products the investors and the banks didn’t know the actual size of the losses. As a result the liquidity of the market became less and the lending decrease, as a result the credit crunch has begun. The other reasons for the financial crisis are the borrowing of the households which were beyond their means, poor lending standards taken by the financial institutions, more over the counter transactions, more reliance on short term debts and the credit rating agencies failure to assess the risk. In the era of globalization the financial crisis of world’s strongest economy also affected the economy of the other countries. In September 2008 Lehmann Brothers was bankrupted and the financial crisis taken place. The report is an attempt to assess the impact on the American economy due to the world financial crisis. This report would find out the GDP growth rate, the changes in the value of dollar, the sector wise impact and the consequent problems caused by the crisis. Growth in the GDP Figure 1: United States GDP Growth Rate Data Source: (Bureau of Economic Analysis, 2011) Gross Domestic Product (GDP) of a country is the representative of the standard of leaving of that particular country and it refers to the value of goods and services produced by the country. The GDP growth of U.S. was affected severely for the financial crisis of 2007-09. The GDP growth has increased 1.9% in the fourth quarter of 2007 from the last quarter. 2008 and 2009, these two years were the two worst years for American economy. In 2008 excluding the 2nd quarter the GDP growth was negative throughout the year. In the 4th quarter of 2008 the GDP growth was -9% which was the lowest for a quarter in the period of Economic recession. From the 3rd quarter of 2009 the GDP growth was tend to positive and after that the growth was always positive. This statistics shows that in that time period the economy was not productive at all. All the sectors were affected by the credit crunch situation more or less, as a result the total GDP of the strongest economy declined. The manufacturing industries were unable to get the credit as they get it in the earlier time. The banks and other financial institutions didn’t get the payment from the debtors, so several banks were declared bankrupted, as a result they were unable to issue credit to the business entities when the business organizations are largely depends on debt from the banks. So the productivity of the organizations became less and the GDP growth rate declined. Impact in the Employment Sector Figure 2: The Layoff due to the Financial Crisis Data Source: (Auer, Auer and Wehrmuller, 2008) From the above graph it can be said that since the 9/11 the layoffs has risen to the highest level. It can be concluded from the statistics that for the financial crisis not only the GDP of the country declined, the layoff rate also reached to the country’s highest level. The cause of the financial crisis was the disability to pay the debts of the households; as a result the bad debt of the financial institutions has increased. Some financial institu ...Show more

Summary

The main cause of the financial crisis of 2007-09 was the housing market of U.S. From the decade of 1990s policy of financial deregulation was taken by the U.S. government. The monetary policy became loose in 2002-2005. From the year 2006 the delinquency rate on the home loan has increased and it got severe in the year 2007 because the Federal Reserve has started to increase the interest rates…
Author : yjohnson
World Finacial Crisis - Impact in the American Economy essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the term paper on your topic
"World Finacial Crisis - Impact in the American Economy"
with a personal 20% discount.
Grab the best paper

Related Essays

Impact the German state on Europe economy
This will factor in the different economic aspects of any economy which include the political institutions, social organization and the overall economic policies or the overriding political ideology. It has even established and agreed over a common currency which is the euro. 
9 pages (2500 words) Term Paper
The Impact of Small Business in our National Economy
All the research material discusses small business, its impact on national economy over a period of time, and what needs to be done to enhance the positive impact. During research, it is realized that better government policies and further investment can work wonders for small business and consequently, for U.S.
8 pages (2000 words) Term Paper
The impact of World War II

The author of the paper states that the call for war meant that factories in US shifted from creating consumer to goods to war weapons in amazing speed. Firms began to produce guns, rockets and took the role of war plants. In essence, America became the biggest super power of producing goods internationally.

5 pages (1250 words) Term Paper
Impact of NAFTA on the US economy
Since its inception in 1994, the agreement has been appreciated for the benefits U.S. economy reaped through it and criticized for the negative impacts it might have had on U.S. economy. This paper discusses some of the negative and positive impacts of NAFTA on U.S.
4 pages (1000 words) Term Paper
The Federal Reserve Controls the American Economy
The Federal Reserve is the fundamental bank of America initiated in 1913 through the ratification of Federal Reserve Act as a reaction to the financial apprehensions of 1907 (Greider 67). However, the functions of the Federal Reserve have widened over time as the bank develops to meet the tests of organization in the economy.
7 pages (1750 words) Term Paper
How the Global Finacial Crisis impacted Egypt
A perfect example of an emerging market, Egypt’s economy was injured by the crisis, especially considering that the nation was in the midst of successful reforms since 1991 that had seen GDP grow by 7.2% in the fiscal year 2007/8 (Altintzis 1). The success of the reforms towards a market-oriented economy cannot be understated especially since they were carried out in the midst of structural challenges such as soaring budget deficits and occasional inflations that constrained the quality of labor.
4 pages (1000 words) Term Paper
American Economy
As different cultures have different ideology and have different customs and traditions therefore it is not very appropriate to impose different injunctions upon these cultures thinking that what they think is right is also right others. There is no such thing as universal right; therefore we are going to determine whether such adopted behavior by the USA and other developed economies is right or wrong.
2 pages (500 words) Term Paper
China and the World: Economy and Security
According to the report Chinese governance over the global economy is reflected by its fast expansion in trade activities with regard to the global trade functions. Further, the incorporation of China in the World Trade Organization has further helped the region to increase its trading activities through changes made in the regulatory mechanisms.
8 pages (2000 words) Term Paper
World Finacial Crisis - Impact in the American Economy
The house loan where the debtors have to pay floating rate interest they were in problem. So the increase of bad loans led to the failure of the mortgage lenders
7 pages (1750 words) Term Paper
Economy of any country in the world
The open economic policy approach, however, ceased to retain its economic success. The essay presents a succinct exploration of problems causing the recession in Germany’s economy, loss of monetary policy independence, a minimal rate of productivity growth and higher
2 pages (500 words) Term Paper
Get a custom paper written
by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Rate this paper:
Thank you! Your comment has been sent and will be posted after moderation