Question

In your own words, how was the the great recession an externality?

Answer 1

The great recession is the externalilty in a way that it had made strong and negative impact to those who had not much to do with these businesses and their activities. But, these people suffered as they lost their jobs, their savings got evaporated and they faced difficult financial conditions for themselves and their families. It became a negative externality for them.

The great recession started due to financial crisis and it began when banks and financial institutions showed excessive greed and gave loans to those people also, who had poor credit ratings. So, banks has greed and people with poor credit history got loans. But due to these activities, common people got affected due to recession and negative externality got created.