MACROECONOMICS >C< W/MYECONLAB
18th Edition
ISBN: 9781323886038
Author: Pearson
Publisher: Pearson Custom Publishing
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Question
Chapter 14, Problem 1.2P
To determine
Impact of stock market crash on different economies.
Expert Solution & Answer
Explanation of Solution
Asia experienced stock markets crash in 1997, as a result, Hong Kong’s was down nearly 30 percent, Thailand’s was down nearly 62 percent and Malaysia was also down around 60 percent. Situation was same in Japan and Korea. Such large drops negatively affect the wealth of households in these countries. Therefore people starts to spend less. As a result consumption decreases which leads to decrease in
These events also affect U.S economy very badly. Mainly, there are several Americans are invested in foreign countries. Therefore when the stock markets collapsed in Asia, would create a modest wealth effect in the U.S market. Another problem faced by the U.S economy was, when the recession occurs in the foreign countries mean that, they would reduce the consumption from the U.S economy as a result, the export demand of U.S falls. Finally, one of the main problem was import prices from Asian countries would fall when these countries compete with U.S firms.
Economics Concept Introduction
Concept introduction:
Stock market: Stock market can be defined as the place where the buying and selling of equities or stocks of publically held companies.
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Chapter 14 Solutions
MACROECONOMICS >C< W/MYECONLAB
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