Question

In your own words, explain the meaning and significance of a Credit Crunch.

In your own words, explain the meaning and significance of a Credit Crunch.

Homework Answers

Answer #1

A credit crunch is a situation in an economy when the availability of credit/loans in the overall economy is significantly reduced.

A credit crunch can occur due to various reasons :

  • Monetary controls by the government or central bank. High reserve requirements for banks is one method that central banks/governments use to reduce the money supply in an economy.
  • Banks expect higher defaults, and therefore are wary of lending

A credit crunch restricts economic expansion as there is shortage of funds for fresh investments. Lending is restricted to high quality borrowers, as lenders are more cautious of lending to low quality borrowers. Hence, those who need credit the most are cut off from lending institutions.

Due to credit crunch, economic growth may slow, or a recession could happen. These could result in rising unemployment.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
In your own words, explain the meaning of ‘flexing the budget’ and why it is necessary.
In your own words, explain the meaning of ‘flexing the budget’ and why it is necessary.
What is the spring constant? Describe the definition and explain its meaning in your own words.
What is the spring constant? Describe the definition and explain its meaning in your own words.
In your own words, explain the meaning of the following terms: Transverse waves Longitudinal waves Standing...
In your own words, explain the meaning of the following terms: Transverse waves Longitudinal waves Standing waves Shock waves
Explain in your own words what the meaning of domain is. Also, explain why a denominator...
Explain in your own words what the meaning of domain is. Also, explain why a denominator cannot be zero. Find the domain for each rational expressions below. Write the domain of each rational expression in set notation. Do both of your rational expressions have excluded values in their domains? If yes, explain why they are to be excluded from the domains. If no, explain why no exclusions are necessary. Incorporate the following five math vocabulary words into your discussion. Use...
Explain how you tell a story or paraphrase in your own words and keep its meaning....
Explain how you tell a story or paraphrase in your own words and keep its meaning. Explain how personal and cultural views on plagiarism might present challenges. Identify and explain any evidence of plagiarism and/or paraphrasing that is found in the student passages provided. Explain at least two strategies you might use to revise the student passages and avoid plagiarism.
      In your own words, explain why a tax credit is more valuable than a tax...
      In your own words, explain why a tax credit is more valuable than a tax deduction of the same dollar amount.
Explain in your own words the difference between a tax credit and a tax deduction. Which...
Explain in your own words the difference between a tax credit and a tax deduction. Which one of the two is preferable? Please, include an example with your answer.
In your own words, explain the three dimensional, time-independent Schrödinger equation. In your own words, describe...
In your own words, explain the three dimensional, time-independent Schrödinger equation. In your own words, describe the atomic structure of hydrogen atom. In your own words, explain nuclear binding energy and structure. In your own words, explain nuclear reactions, nuclear fission and nuclear fusion. please type it do not write it please
What is the significance of a holistic approach to nursing care? Please explain in your own...
What is the significance of a holistic approach to nursing care? Please explain in your own words in 2 paragraphs.
How is the economy impacted by a credit crunch?
How is the economy impacted by a credit crunch?