ECON210 1501APhase 5 IP

Topics: Monetary policy, Economics, Keynesian economics Pages: 5 (834 words) Published: March 23, 2015


ECON210-1501A-02
Phase 5 IP
2/11/2015

Monetary policy
What monetary policies do you think caused the crisis?
The rapid increase of prices of some goods as speculators rush in caused the crisis. The main reason for this is because many people were not willing to purchase some goods at higher prices yet they were of low value. Therefore, the increase of prices was one of the main monetary policies which caused the crisis (Beetsma, Favero, & Conference 2014). Research shows that there was enough and available liquidity to inflate housing bubble. Then after the increase of prices in the markets, something went wrong and caused the crisis. What were the effects of the policies implemented in reaction to the crisis? The policies affected the economy of the country because only few people were interested in purchasing the products available in the market. Many people complained that there were long queues in banks because people were trying to withdraw all what they had because of economic changes within the country (Great Britain. 2010). Therefore, monetary policies affected the economy of the country in different ways living a big gap in between the country and the economy. All that happened because of the incentives which happened in the market places for the last few years. Do you think the solutions worked in the short term? In the long term? From my point of view, I think the solutions worked in short term. The main reason for this is because many people didn’t want to see the ramifications of their often short sighted actions. The reason why long term was not used is because it requires many things such as adapting earlier solutions to meet new realities, in-depth analysis, patience and compromise of which many people do not posses (Langdana, 2009). Therefore, the solutions worked in a short term rather than long term. Fiscal policies

What fiscal policies do you think caused the crisis?
From my point of view, it is true to say that the borrowing of money from other countries to give other people to share caused the crisis. The main reason for this is because the government was unable to pay the total amount borrowed from other countries. Through this, life changed dramatically and people started paying high taxes to refund the borrowed money. Therefore, borrowing money from other countries to support and certain activity in the country is the fiscal policy which greatly impacted and caused the crisis. This is because the government was unable to pay the loan. Through the inconveniences of paying the debt, the government turned up increasing the rates of tax to get back the amount required to pay the loan. Under this situation, no one had to complain and especially government employees. The main reason for this is because 20% deduction was the set price for each employee at the end of the month. After conquering all these challenges, the products in shops increased their prices hence killing the admin of the economy. What were the effects of the fiscal policies implemented in reaction to the crisis? The implemented fiscal policies affected the lives of many people because everything was doubled and taxes increased surprisingly within a short period of time. This affected many people and it lowered their living standards. Through this, some people worked only for paying taxes because 20% of their salaries were deducted. Therefore, the results watered down the performance of many even though the seniors in the government were excluded. Some children dropped out of school because their parents had no money to sustain their needs after the implementation of the policies. This was an indication that the impacts of the fiscal crisis impacted negatively to the lives of many in America. Do you think the solutions worked in the short term? In the long term? Armed with all that I have read concerning long term and short term methods of solving solutions, it is true to say that the only means the solutions...

References: Beetsma, R. M. W. J., Favero, & Conference. (2014). Monetary policy, fiscal policies and labour markets: Macroeconomic policymaking in the EMU. Cambridge [u.a.: Cambridge Univ. Press.
Great Britain. (2010). Monetary and fiscal policy: Present successes and future problems. London: Stationery Office.
Langdana, F. K. (2009). Macroeconomic policy: Demystifying monetary and fiscal policy. New York: Springer.
Stehn, S. J. (2009). Optimal Monetary and Fiscal Policy with Limited Asset Market Participation. Washington: International Monetary Fund.
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