Answers To Questions Essays Examples

1. What was the role of increasing risk and banks in the development of recent financial crisis?
The banks have provided many agents in the economy with the large loans to purchase the expensive houses. Normally, the financial institutions have to make a serious analysis of the loan demands to make sure the creditor can repay the loan. The financial institutions have followed a marketing strategy and provided large funds to the people with the incomes not enough for repaying the credit. 2. What are sub-prime mortgages? What is their role in recent financial crisis?
The mortgage credit market has created some secondary markets to support the mortgage credit market and develop new credit services for the clients. In the secondary markets, people and companies could sell or buy the mortgage loan papers. Also, the sub-prime mortgages were formed to create an insurance system for the mortgage credits.
The prices in the sub-prime mortgage markets have dramatically increased, and a bubble came into existence. These high prices made the house owners not be able to repay their loans, and the financial crisis has started jumping to the other markets. 3. What were the factors leading to a bubble in the housing market?
The financial institutions have followed a marketing strategy to give more mortgage credits and some other relevant financial products to their clients. The legal framework was allowing this. The clients, after taking the opportunities provided by the financial institutions into consideration, have increased their demands for the mortgage credits and the other relevant credits to purchase houses. The increasing demand has created a bubble in the real estate market. 4. What was the role of government agencies in the process leading to the financial crisis?
The government agencies could monitor the movements in the mortgage credit and the other relevant financial markets and regulate the markets or make some amendments in the law of banking. Indirectly the government agencies have caused the crisis by staying inactive before the crisis. 5. How did US domestic financial problems become global?
The crash of the financial markets in the US has created two main negative influence on the other nations' economies: 1) Decreasing international trade and 2) negative psychological influence and catastrophic expectations. The American Economy is the largest one in the world, and almost all the countries have a trade relation with the US. Because of the financial crisis, the demand for the agents in the US has decreased, and the international trade volume has decreased. Secondly, the agents in the other economies have seen what was happened in the American Economy, and many have thought that their countries might have similar problems. The belief in their economies has disappeared, and they have developed catastrophic expectations for the world economy.