The Stock Market Crash
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The Crisis¬†The GFC was caused by the fall is U.S. house prices from 2007, which had doubled since 2000 ¬†It exposed serious housing finance weaknesses in the US, creating a crisis for the major banks ¬†The stock markets fell everywhere as a result of the financial crisis, majority of the world relied on the stocks on the US citizens¬†¬†Introduced monetary policy through interest rates and quantitative easing ¬†Governments spent and borrowed a lot as a result of the crisis ¬†¬†Expansionary Monetary Policy – Governments try to expand spending by reducing interest rates, increase demand, unemployment goes down. ¬†Restrictive Monetary Policy – Interest rates go up, spending goes down, people save more in order for the government to avoid inflation.¬†¬†(Nominal interest rate – inflation rate = real interest rate) ¬†¬†How did Australia¬†avert the worst effects of the crisis of 2008?¬†The Mining Boom: Australia had an abundant t amount of gold and coal The Fiscal Policy: Substantial policy enacted by both the Rudd and Gillard government The monetary policy: cash rate was cut from 7% to 3% in 6 months in order to boost the level of spending and cash flow¬†The United States ¬†Output growth was strong until 2007 due to Aggressive monetary policy (Feds kept the interest rate very low – down to 1%)Aggressive fiscal policy – big “temporary” tax cuts by Bush Weakening US dollar exchange rate boosting exports ¬†Crisis on the Wall Street spread to all financial capitals in the world, and then to the Main StreetUS growth was negative in 2008-2009 due to the financial crisis Unemployment doubled Inflation turned tod deflation in 2009 ¬†The Great Recession¬†Weakness in the architecture and regulation of housing finance in the U.S. led to bankruptcy of major investment banks Interest rates lowered to almost 0Fed introduced ¬†innovative ways to create more liquidity to encourage banks to restore normal lending Large fiscal stimulus plans Improved financial regulation ¬†The European Union ¬†France, Italy, Germany and Spain generate 60% of total output of the EUUnemployment rate = 6.6%Growth = 0.2%¬†ISSUES IN EUROPE:

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Interest Rates And Monetary Policy. (April 3, 2021). Retrieved from https://www.freeessays.education/interest-rates-and-monetary-policy-essay/