how do the financial crises influence the economy?
A financial crisis occurs when there is a disorderly contraction in money supply and wealth in an economy. It is also known as a credit crunch. It occurs when participants in an economy lose confidence in having loans repaid by debtors. [ This causes lenders to limit further loans as well as recall existing loans. Therefore, there will be less growth due to limited loans and consumers will buy less without loan approval. Suppliers required when loans (of any kind) are not approved means their demand for goods goes down and may cause the company (of the supplier) to go out of business.
Its basically the premise of the law of supply and demand. Less loans = less demand= less supply needed resulting in closed operations of suppliers. ]
Expert answered|tcapone|Points 76|
