how can we prevent economic crisis?( for class 8th)
Answers
Answer:
Solutions to economic crisis
Cutting interest rates – makes borrowing cheaper and should increase the disposable income of firms and households – leading to higher spending.
Quantitative easing – when Central Bank creates money and buys bonds to reduce bond yields and.
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Answer:
Economic crisis could involve
Lack of economic growth/recession
High Unemployment
Long-term structural deficits
Lack of confidence in finance and consumer sector.
Rapid devaluation
Explanation:
To prevent economic crisis we can ,
Fiscal policy – When the government influences demand through changing spending or taxes.
Government investment in new infrastructure (e.g. New Deal in the 1930s) helps to stimulate demand and creates jobs.
Income tax cuts – increasing the disposable income of workers, encouraging them to spend.
Monetary policy – When Central Bank influences demand and supply of money.
Cutting interest rates – makes borrowing cheaper and should increase the disposable income of firms and households – leading to higher spending.
Quantitative easing – when Central Bank creates money and buys bonds to reduce bond yields and
Helicopter money – when the central bank creates (prints) money and gives it to everyone in the economy.
Supply-side policies – Long-term policies to try and improve productivity and efficiency in the economy.
Free market supply-side policies – reducing government intervention in the economy, e.g. lower taxes
Interventionist policies – government spending on education and training
IMF bailout – IMF give money to stem the loss of confidence and implement structural adjustment policies, e.g. better tax collection, privatisation, price liberalisation.
Government bailout of industries/banks. To prevent loss of confidence in financial sectors.