Question

discuss the recession of 2008 in terms of the behavioral economics concepts in the chapter with your own experience or of someone you knew experienced this crisis

Answer 1

Introduction:-

The 2008 Economic Crisis primarily started in the United States and spread to the rest of the world. It was fueled by the housing crisis and led to wide spread problems for all countries and jobless growth which resulted in lack of demand and supply in the country.

Behavioral economics analyses how people behave in certain situations and how their decision making is altered and effects the economics of the world.

In the year 2008, what happened was a shift in how the global economics works. It is the most modern recession which took place across the globe and widely implicated the decision making of everyone which was well researched to analyze why a particular decision is taken by people.

A resultant of global economics was that recession was not limited to the United States but spread across the globe and since, countries were interconnected it meant that people reacted in a similar manner also.

Case Specifics:-

The effects of global recession on people and behavioral economics was how they reacted to the situation and how it further fueled recession. When recession started, the amount of money which people had reduced. This was because bad debts grew and people had no money left to purchase goods and services which were being sold in the country.

As a result, the resultant behavior was a control by people who were suppliers they reduced jobs in the country since there was no demand left and the losses had to be reduced. This further lead to rapid change in people psychology in terms of reduced jobs.

Thus behavioral economics also displayed a full cycle in all types of people i.e. those that demanded products and those that supplied them.

People having demand became controlled and so did those supplying products, their changed behavior and the way in which they spent their money fueled economic recession which required active government regulations, investment and reduced interest rates post which people responded in a positive manner respectively.

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