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Essay / Research Paper Abstract
This 3-page paper discusses the U.S. economic crisis of 2008 using the DD-AA Model, and notes if the steps taken will be effective. Bibliography lists 1 source.
Page Count:
3 pages (~225 words per page)
File: D0_MTddaaecon.rtf
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Unformatted sample text from the term paper:
New York Times demonstrates a desperate Treasury Department trying yet another method to restore faith in the financial system - this one involving taking on ownership stakes (Andrews and Landler,
2008). In addition to the $700 billion bailout passed by Congress in early October, Treasury officials are also willing to inject cash directly into banks that request it (Andrews and
Landler, 2008). The idea here is that the move would help add much-needed liquidity to the banks balance sheets, and would hopefully unfreeze credit and get money moving through the
system yet again (Andrews and Landler, 2008). Other countries, such as Britain, are offering banks money to boost their capital, in exchange for "preference shares" (Andrews and Landler, 2008). In
other words, this would be a direct investment in the banks, with the idea that the banks would then take that money and invest it in other things, in an
attempt to get the economy and credit moving once again. Even more importantly, the move is an effort to try to get
investors and the population more comfortable in doing business with banks yet again. In terms of a DD-AA Model, until people are comfortable giving their banks money again, and until
those banks stop hoarding the money, no proposed solution will work. Why? The basics of the DD-AA model are that the DD
curve stands for exchange rates and output that help clear the market for goods and services. Meanwhile, the AA curve is the combination of exchange rates and output that clear
the asset markets, such as money markets and the foreign exchange markets. In an economic downturn, the DD curve is impacted because rates fluctuate. But the problem that the markets
...