Monday, February 24, 2020
Economic downturn Essay Example | Topics and Well Written Essays - 250 words
Economic downturn - Essay Example Another cause of this economic downturn is borrowing and lending of money. For example, the banks of developed countries are keen to lend to developing countries. This makes both the lender and the borrower unstable as the lender is not left with any money for his use and the borrower gets deeper into the loan. Due to this system, the financial intervention has changed into globalized finance. In addition to that, shortages of basic necessities especially food, have also caused many economies to ruin. Recently these crises are increasing at a staggering rate. These shortages cause developed countries to be crushed under the loans from developed ones. Fluctuations in the real estate markets also fuel the downturn of any economy. For example the collapse of Lehmann brothers caused a great downturn in the US economy. Housing, being one of the basic necessities of life, has a great impact on the lives of the people. Large financial institutions invest in housing as it is a productive sec tor. People also borrow money to buy houses and expect the prices to rise so that they can get profit. The variations in the exchange rates also trigger the economic recession. An appreciation in a countries exchange rate can cause problems for other countries as well.