Question

Name and explain 4 corrective actions that were taken by the government in response to 2008 economic crisis

Answer 1

Followings 4 corrective actions taken by the government in response to 2008 economic crisis;

1. Central banks of the most of the countries took important steps to improve monetary supply in the economy so that proper supply of the money can be maintained in the economy and the risk of a deflationary spiral can be eliminated. In other words we can say that central banks reduced various types of interest rates so that loans can be taken on lower rates. Overall such steps helped in improving supply of the money.

2. Central banks of various countries purchased government debts so that bank can be realeased from the financial stress. In other words we can say that Federal Reserve, the European Central Bank, the Bank of England purchased most of government debt because banks were much suffered with financial burden hence central banks decided to remove such financial pressure from bank through buying the government debts. So that banks can have sufficient funds for smooth movement of the economy.

3. Governments have also bailed out a variety of firms during this financial crisis, as we know that during financial crisis many firms suffered with financial problems hence government decided to offer some financial help to these firms so that these firms can be in good financial position.

4. Government took various legal & regulatory steps to handle such financial crisis. Such regulatory steps were mainly designed for improving followings practices in the countries;

Lending practices, bankruptcy protection, tax policies, affordable housing, credit counseling, education, licensing practices etc. Apart from this regulatory steps were introduced to improve transparency and ffor reducing complex financial systems of the country etc.