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A financial crisis occurs when a particular large disruption

A financial crisis occurs when a particular large disruption to information flows occurs in the financial market. The financial crisis of 2007 started in the United States and spread around the world, but it did not lead to a depression because of the aggressive action by President Obama’s and other leaders throughout the world.

Point of detail:

· Please submit 1 paper. (maximum 1 page per question, double space, be meager with yours words while providing important and crucial details – no rambling)

·. Use sub- headings for each question and label with the respondent’s name.

Questions

  1. Discuss the financial crisis of 2007-2009 in USA and compare it with the Great Depression in 1929 (B) what triggered both crisis? (The Great Depression and the financial crisis 2007-2009)
  2. Discuss three similarities and three differences the United States experienced during the Great Depression and the financial crisis of 2007-2009

A thorough and insightful response to questions essential

Sample Solution

The current state of Venezuela, demonstrates the profligacy exhibited that lead to fiscal dominance of monetary policy. In attempt to diminish the gap between spending and revenue, a government may decide to fund expenditures via tax revenues – bonds that are to be paid back through future tax revenues or through central bank seigniorage – could be implemented. Seigniorage reliance from the government is likely to govern a lack of incline to continue using a currency which is losing value. Part of the seigniorage serves a purpose as an inflation tax. The rate of inflation acts as a tax rate therefore an increasing rate of inflation would result in higher levels of revenue for the government. This however, is dependent on the public’s willingness to maintain real money balances as an increase in inflation means a decrease in money balances available for public holding – potentially limiting the revenue generated by the government. In essence, hyperinflation can potentially be perceived as a large scale taxation scheme. During periods of inflation, the real purchasing power of tax revenues decline. Constant expenditures lead to a larger budget deficit as a result of the reductions in the real value of revenues. This tendency of inflation to increase the real budget deficit is referred to as the Tanzi effect. During hyperinflation, however, the Tanzi effect reduces the real value of tax revenues. It’s deemed that so long as individuals remain confident in fiscal authorities and their ability to respond to inflation – via the means of increasing taxes or decreasing expenditures – they will hold money as a means of exchange and store of value. However, upon the emergence of the Tanzi effect, people’s confidence in the government’s ability to manage the deficit is disrupted, prompting them to reduce their holdings of real money balances (Niskanen Center 2018). It’s apparent that the Venezuelan government spending is significantly exceeding that which it is taking in and therefore putting them in a budget deficit. The government ceased releasing statistics with regards to the magnitude of the country’s budget deficit a few years ago. Nevertheless, reducing it is deemed a prime concern. However the CIA have estimated that the deficit is approximately 46% of the countries gross domestic pr
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