The credit crunch is the term generally used to describe the crisis in world banking which emerged in August 2007. Quite simply, banks both here and in the USA made large amounts of injudicious loans to high risk borrowers. When these high risk or sub-prime borrowers defaulted the banks were forced to cut back on new lending and to attach very strict conditions to such loans. Indeed a number of banks lost so much money on these loans that they became virtually insolvent and were only saved from bankruptcy by massive government bailouts.
This led to great difficulty in obtaining mortgage finance and there was a collapse in the housing market on both sides of the Atlantic. A major fall in aggregate demand and a recession inevitably followed this financial crisis.
queen babito answered the question on July 9, 2018 at 06:50
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Economic theory assumes that consumers will buy more of a product when price falls and less when price rises. Evaluate the view that this assumption...
(Solved)
Economic theory assumes that consumers will buy more of a product when price falls and less when price rises. Evaluate the view that this assumption is unrealistic
Date posted:
July 9, 2018
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Answers (1)
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Analyse how a change in demand or supply in one market may have effects on other markets
Date posted:
July 9, 2018
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(Solved)
Explain what is meant by the market clearing (equilibrium) price.
Date posted:
July 9, 2018
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Explain what is meant by productive and allocative efficiency
Date posted:
July 8, 2018
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Critically examine the impact of globalisation on Less Developed Countries (LDCs)
Date posted:
July 8, 2018
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Critically examine the view that a deficit on the current account of the balance of payments is of no economic significance.
Date posted:
July 8, 2018
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Answers (1)
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(Solved)
Explain the difference between fixed and floating exchange rates.
Date posted:
July 8, 2018
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(Solved)
Explain how the short run price and output decisions of a profit maximising firm would differ from those of a revenue maximising firm
Date posted:
July 8, 2018
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Answers (1)
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(Solved)
Critically examine the view that mergers are against the public interest and should be outlawed
Date posted:
July 8, 2018
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(Solved)
Explain the difference between organic growth and growth by acquisition or merger
Date posted:
July 8, 2018
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Answers (1)
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(Solved)
Evaluate the policies that governments could use to deal with market dominance and the abuse of monopoly power
Date posted:
July 8, 2018
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Answers (1)
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(Solved)
Explain why some industries are natural monopolies.
Date posted:
July 8, 2018
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Answers (1)
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(Solved)
Analyse how government policy could reduce income inequality.
Date posted:
July 6, 2018
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(Solved)
Explain what is meant by the distribution of income.
Date posted:
July 6, 2018
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(Solved)
Using appropriate examples, explain some of the methods a government could use to increase the consumption of merit goods.
Date posted:
July 6, 2018
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(Solved)
Explain what is meant by a merit good
Date posted:
July 6, 2018
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Critically examine the view that the government should not intervene in labour markets.
Date posted:
July 6, 2018
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Analyse how labour markets might be affected by a decrease in the supply of migrant workers.
Date posted:
July 6, 2018
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Answers (1)
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Evaluate the view that trade liberalisation alone is insufficient to ensure development of poorer countries.
Date posted:
July 6, 2018
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(Solved)
Explain the roles of the International Monetary Fund and the World Bank.
Date posted:
July 6, 2018
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Answers (1)