What is the global financial crisis and its impact on the global economy
When the financial system or the economy as a whole undergoes a rapid and large decline, it is said to be in a financial crisis. Financial assets like stocks, bonds, and real estate often see a sharp and significant decline in value during financial crises. They can also be identified by a decline in credit availability and a loss of faith in financial institutions like banks.
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Financial crises can be caused by a variety of factors, including:
This article will discuss the global financial crisis (GFC) of 2007-08, its main causes, and how the financial crisis impacted the economy.
The global financial crisis of 2007–2008 was a major financial crisis that had far-reaching impacts on the global economy. A housing market bubble, unethical subprime mortgage lending practices, and the overproduction of sophisticated financial products like mortgage-backed securities all contributed to its cause.
The subprime mortgage market in the United States, specifically, served as the catalyst for the 2007–2008 global financial crisis. Loans with risky lending terms and high interest rates were given to borrowers with bad credit records under the phrase "subprime mortgages." A housing market bubble in the US was brought on by the rise in subprime mortgage loans and the subsequent marketing of these loans as securities.
Many borrowers were unable to make mortgage loan payments when the housing bubble eventually burst and prices started to plummet, which sparked a wave of foreclosures. The value of mortgage-backed securities decreased as a result, and the global financial system experienced a liquidity crisis, which set off the GFC of 2007–2008.
Due to the crisis, home prices
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