ASSIGNMENT ON IMPORTANCE OF ECONOMICS

Running head: ECONOMICS
ECONOMICS
Name of the Student
Name of the University
Authors note

ECONOMICS
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Table of Contents
Event 1.................................................................................................................................2
Event 2:................................................................................................................................4
Event 3:................................................................................................................................5
References............................................................................................................................9

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Event 1
The financial crisis in 2007 was the result of the trust-break which took place between the
banks just before the financial crisis that happened in 2008. The reason was the subprime
mortgage crisis, which occurred due to the unregulated utilization of derivatives. It includes
initial warning signs, reasons, and breakdown signs. U.S.Treasury and Federal Reserve took the
necessary steps to prevent the collapse of the economy (Hein 2017). Regardless of these efforts,
financial crisis let to the"Great Recession" –
 The"subprime mortgage crisis" began when the industry's bubble concerning the asset busted
in 2007. And the 2007 financial crisis steered in the 2008 Great Recession.
 In the year before the financial crisis materialized, the values of houses increased, and
mortgage rates were low; hence the houses were acquired not for living but just for the sake
of investment.
 Financial industries invested heavily in"mortgage-backed derivatives" and therefore, the
housing industry's recession converted into the financial industry's devastation.
 Government entities, including Fannie Mae, started providing guarantees for mortgages even
though they being the subprimes or those who have given loans to people who usually would
not qualify for the loans.
The Irish economy (Republic of Ireland) expanded swiftly from 1995 to 2007 because of
the low rate of corporate tax, low ECB interest rates and other factors such as surveillance of
banking supervision, and anti-corruption systems prevailing in Ireland. It was Europe's poorest
country in the early 1980s, but by 2007 it has become reached on top by becoming one of the
richest countries among ten countries in OECD. In this period, the economy advanced due to

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strong inward investment by foreign MNCs because of the low corporate tax rate and skilled
labour. Multinational companies like Google and Microsoft are operating from Ireland. The
country also attracted pharmaceuticals firms like Glaxo Smith Kline. Due to the existence of the
MNCs, GDP was higher than the GNP caused by the significant payment transfer of profit back
to the original country.
Post-crisis Irish banks were overexposed to the property market and arose under extreme
pressure in September 2008 because of the global financial crisis of 2007-08. The foreign
borrowings increased from € 15 billion in 2004 to € 110 billion in 2008. The Irish economy and
its finances showed signs by the end of 2007 of the forthcoming recession. There was an increase
in Government deficits, unemployment and the closure of many businesses. It also led to the
falling of the"Irish Stock Exchange" and which caused many immigrant employees to leave the
country. In2009's first quarter the GDP declined by 8.5% as compared with the previous year,
and GNP fell by 12%. Unemployment which is one of the macroeconomic variables – increased
upto 11.4%, which was previously 8.75%. The unemployment rate was 4.2% in 2007. The Irish
economy was among the nations which were hit hardest by the 2007/8 economic crisis.
After the global financial crisis, the E.U. provided financial support to Ireland by the
provision of € 85 billion to them. The E.U., through EFSF; European financial stability
mechanism, bilateral loans from the U.K. and Sweden and through IMF, provided the support
based on particular conditions. The fiscal measures were – (i) taxation, (ii) increase in excise and
other taxes, (iii) increase in carbon-tax, (iv) to reduce general tax expenditures, (v) decreasing
pension tax relief and deductions, (vi) reforms in capital gains and acquisitions taxes. It also
stated the introduction of a Fiscal Responsibility law consisting of mid-term expenditure
framework. The Government thought of establishing a budgetary advisory council for