Question

Part 4

Explain how, in general, a financial crisis can lead to a recession.

Explain how, in general, a major new invention can lead to an economic expansion.

Answer 1

Solution:In general a financial crisis can lead to a recession Financial crisis through unexpected financial bubble bursts can spill over to the economy by contracting lending, and eroding the confidence of consumers and businesses.Irregular innovation of new products or production methods can rapidly spread through the economy, sparking sizable increases in investment, consumption, output, and employment. Of course, afterwards the economy will slow or decline for a bit.