Chapter 2 Discussion Questions Intro to Business

1. How did the global economic crisis unfold?

On September 2008, the United States economy plunged into a deep economic crisis. The banking system hovered on the edge of collapse values plummeted, and home foreclosure rates soared. Massive layoffs put more than a million Americans out of work. By the end of the year, the stock market had lost more than a third of its value. To prevent total financial disaster, the federal government and the Federal Reserve intervened in the economy at an unprecedented level by bailing out huge firms that faced total collapse. Early 2009, Congress passed a colossal economic stimulus package, it was designed to turn around the economy and position the US for long-term economic growth. Mid-2010, the economy began a painfully slow turnaround, unemployment remained stubbornly high through 2012 with uncertain prospects of recovery.

2. What steps did the Federal government and the Federal Reserve take to mitigate

     the crisis?

Federal government and the Federal Reserve decreased interest rates, and subprime mortgage came into play. They seized a few companies that controlled a lot of the mortgage. The congress passed a 700 billion dollar bailout plan. As the new administration began Obama passed an 825 billion dollar bailout plan.

3. Compare and contrast microeconomics and macroeconomics. How do the two approaches interrelate? Use a specific example to explain.

Macroeconomics is the study of a country's overall economic issues such as performance, structure, behavior, decision making, and study rates. Ex. The unemployment rate. Microeconomics focuses on smaller economic units such as individual consumers, families and businesses. They can affect how much and what you can buy for your family. Ex. Income of an individual consumer.

4. What is the difference between fiscal and monetary policy? What role does

     politics play in shaping these policies? 

Fiscal policy and monetary policy refers to efforts to shape the...