Budget /Financial crises Contents Introduction 3 Research aims and objectives 4 Research Question 4 Literature Review 4 Research Limitations 7 Research findings and Analysis 7 Recommendations 10 Works Cite 12 Introduction The financial collapse that took place in 1929 indicated the U.S…
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The financial sector was regarded as the servant of the real sector. The financial sector was thought to contribute in the most efficient fashion in economic performance for the years to come. The U.S. economy is regarded as the world’s largest economy and it possesses the characteristics of a mixed economy. The budget deficit for the financial year 2012 is 1,327 billion dollars (Chantril). The deficit for the year 2011 and 2010 was 1, 300 billion dollars and 1,293 billion dollars respectively (Chantril). Free market system exists in the economy. There is correlation between the federal budget and economy. The budget impacts on the growth of the economy and allocation or redistribution of resources. The difference between budgetary spending and revenues is defined as the budget deficit. Budget deficit contribute in the level of national debt. A variety of problems can result because of budget deficit. Lower national savings rate, higher rates of interest and inflation are some of them. The federal budget is taking an unsustainable path. The debt levels of the federal are expected to grow with the size of the economy. The elevated budget deficit is the cause of increase in federal debt. This will shed its effects on economic downturn. The excess expenditure is financed through borrowing. The federal government takes the policy of issuing securities. The households can make up their budget deficits through loans and credit cards. Some of the measures to curb down the budget deficit are cutting expenditures, levee taxes or a strategy that will involve both. Research aims and objectives The aim of the research is to identify the causes of the debt and how to overcome the crisis and how to overcome the crisis. Research Question Can the debt be corrected without raising taxes? Literature Review The rapid appreciation of the dollar was one of the important topics in the early 1980s. The U.S. deficit is hold to be one of the reasons for the appreciation. The real interest rates will get affected by any increase in the amount of deficit. The high interest rate will crowd out private investment spending. Such crowded out funds will find its destinations in other parts of the world. As the capital account surplus rises in the U.S., the real exchange value of the dollar will take the steep path upwards. Economists have not been able to land upon on a unanimous decision on the cause behind the changes in the value of dollar. The market’s expectation on the future behavior should be reflected in the current exchange rate. The observed and expected current fiscal policy of the country is assumed to have significant effects on the international exchange rates because of globalization. The rapid increase in expectation on future deficits has contributed in changes in the dollar value in the initial years of 1980s. Again the reduction in the value of dollar in 1985 may be due to the fall in expected deficit in the budget (Melvin, Sclagenhauf and Talu, 2012, 500). Now we consider the present situation of the national debt. The debt amount currently exceeds 10 trillion dollars. Economists are of the opinion that the level of the debt is not alarming when compared in international standards. The current account in the balance of payments statistics is the prime reason for the deficit. The record displays the flow of transactions over a period of time. The accumulated wealth owned by the federal government is regarded as the national debt.
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“Budget /Financial Crises Research Paper Example | Topics and Well Written Essays - 3000 Words”, n.d. https://studentshare.org/macro-microeconomics/1396726-budget-financial-crises.
has always been the bane of other countries because of high U.S. educational standards. The U.S. already has a national budget deficit over $10 trillion-dollars due to fighting two wars overseas, a national mortgage crisis in which over 40% of mortgages are underwater due to lending malpractices, and rising fuel and food prices due to political unrest in oil-producing Middle Eastern and African countries.
Also the lower level of investment is creating negative effects on the level of production and thus on the amounts of banking deposits (Bexley et al., 2011, p. 2). This paper is aimed at describing the effects of the financial crisis on banking industry. The issue and positive and negative externalities: The list of disturbed banks on the watch list of the regulatory agencies is at a strangely high stage as well as is the absolute number of banks which are bankrupt and are forced to close.
These included banks among which Citibank belongs. Citibank is one of the leading banks in the United States of America. With a customer base of more than five million, the bank is definitely reputable. Before the crisis, Citibank’s performance was on the increase, which implied that the bank had succeeded in developing a trusted relationship with her clients.
By the start of the millennium, the Eurozone appeared to be performing well economically. Most countries in the European Union were performing well and some economists argued that the countries would be amongst the most competitive economies in the world.
The administrations of various countries have taken and continue to adopt unseen, significant actions, but we need to watch and wait for the results. Moreover, real estate investment is an essential contributor to household welfare, urban development, and growth of an economy.
In reality, the Asian financial crisis became the severest form to affect developing countries after the huge 1982 debt crisis. In this way, this crisis was least expected and most financial observers did not think the Asian economy would collapse. The crisis shed light on possible weaknesses within the international capital market in the event of immediate reversals of a growing market.
Now these are significant figures that should cause major alert. These will have adverse affects of decreased transfer rates, increased time to maintaining a degree, increased levels of student debt, decline in the quality of
Almost every financial crisis in the past was either resultant of failure bank or resulted in bank runs (Diamond and Dybvig, 1983, pp.401-419). Very recently the US economy has started to rollback its quantitative easing programme as the economy is struggles
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