Explain the causes behind the global financial crisis of 2008. What we

Question

Explain the causes behind the global financial crisis of 2008. What were its macroeconomic effects? What were the policy responses initiated by the U S government to combat the global financial crisis of 2008?

03 May 2024

Answer :

Word Count : 699

The global financial crisis of 2008 was a severe economic downturn that originated in the United States and quickly spread across the world. The crisis had its roots in the subprime mortgage crisis, which was triggered by the bursting of the housing bubble in the United States.

Causes of the Global Financial Crisis of 2008:

1. Subprime Mortgage Crisis:
- Relaxed lending standards and low-interest rates led to a housing boom and an increase in subprime mortgages (mortgages given to borrowers with poor credit histories).
- When housing prices started to decline, many borrowers defaulted on their mortgages, leading to a wave of foreclosures.

2. Securitization and Derivatives:
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