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Global Financial Crisis STC

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Global Financial Crisis STC
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  Warren Buffet‟s Advice to young people:   “Stay away from Credit cards ( Bank loans) and invest in yourself and remember: ã   Money doesn‟t create a man –  it is man who created Money ã  Live your life as simple as you are ã   Don‟t do what others say, just listen to them, but do what you feel good   ã   Don‟t go on brand, just wear those things in which you are comfortable   ã   Don‟t waste your money on unnecessary things   ã   After all its your life, then why give chance to others to rule your life.”    Why did this happen to USA?    America has some 45 Nobel laureates in Economics from 1970.   From 2000 alone there are 15 Nobel laureates in Econometrics sitting on company boards, treasury benches and in places like Harvard, Stanford etc.   How come none of these had any inkling to the disaster awaiting the banking circles all over the world?   Even the finance ministers of G-7 talked of strong fundamentals of world economy around some time back!   Recently the only topic they were discussing was the rise in oil prices. Moral of the Story : Some American economist will study this, write a new a theory and get Nobel Prize next year.    KEY TERMS AND EXPLANATIONS Meaning of Financial crisis The term financial crisis refers to a situation in which the supply of money is outpaced by the demand for money. This means that liquidity is quickly evaporated because available money is withdrawn from banks forcing banks either to sell other investments to make up for the shortfall or to collapse. Recession In economics, the term recession generally describes the reduction of a country‟s  gross domestic product (GDP) for at least 2 consecutive quarters in a financial year. The dictionary definition is - “a  period of reduced economic activity”,  a business cycle contraction. GDP = Value of all the reported goods and services produced by the people operating in the country GDP = MONEY VALUE OF { C+I+G+(X-M)} C=Consumables, I = Gross Investments, G=Govt.Spending, X=Exports, M=Imports
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