Contemporary

Principle of Macroeconomics (ECON210-1504B-09)

Unit 5 (IP) Contemporary Economic Issues

Earlene Kirby

Instructor: Deborah McCafferty

The financial crisis of 2008, begin with the collapse in the housing prices. Which led to defaults on mortgage backed securities.

To understand the monetary policy and the fiscal policy is really very important in containing the damage from the current crisis from that point on.

How the monetary policy was contributed to the financial crisis that had created potential for high inflation, by beginning to tighten policies with its standard procedures of raising its target on interest rates, the Feds went in the opposite direction to far. The monetary policy can help to relief some of the problem that was impacted on the “fiscal stimulus” which lasted for a extended period.

How the fiscal policy contributed to the financial crisis John Mayard Keynes once wrote “Practial men who believe themselves to be quite exempt from any intellectual influences, are the slaves 0f some defunct economist”. Keynes would most likely to amit that he is now the defunct economist if he could communicate with us today. Keynes is the person whom introduced the “fiscal stimulus”. Even though the fiscal stimulus program was not large enough to help the economy. But by using the stimulus to send checks to the people, it set back on the capital spending funds for goods and services, which was not good. The crisis which has spread though the policymakers has compound their mistakes which has made matters worst. It is best to remain defensive and stay away from investing into any kind of stocks. But the ability for available credit is most likely will still be a serious problem.

As long as the government keeps borrowing from the limited funds we will not get out of debt. By borrowing from the limited funds that is available for capital projects it will...