financial crisis of 2008

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Abstract
This paper discusses main reasons of global financial crisis, how it affected economies of different countries. In this paper we will examine the impact of financial crisis on the United States of America, the countries of European Union and Armenia. We will present problems that these countries had during the crisis, and how they managed to solve them. Paper consists of literature review from both primary and secondary sources. At the end, we will try to present solutions to problems that global economy is facing now.
Introduction
During the period prior to global financial crisis the developed and developing countries in total experienced remarkable economic boom. The annual growth rate was about 7%. Such a high growth rate was established as a result of four main elements combination: market in general, outstanding financing, high service prices and large financial transfers. Global economical history had experienced the combination of two elements, for instance in 1970s, while the combination of more than two never occurred before. The rise of Chinese market represents the fourth element that highly impacts world trade trends and service prices. Soon the global economic situation was altered, . Global Financial Crisis

Since the third quarter of 2008 the conditions of market were replaced. These changes were the consequent effects of financial chaos that rose in 2007 in the United States of America,. Afterwards the effect was so strong that transformed into the worst global financial crisis and depression since Great Depression, , . In other words the global initial fear in the rest of the world initiated as the market collapsed in United States. Consequently the economy of developing counties was affected either directly or indirectly.

Now, as the market starts to rehabilitate the causes and effects of the crisis are widely evaluated and it appears to be that the crisis was unavoidable and that it was possible to predict based on prior “warnings”.

Interestingly, panic enhances the impact on the economic effects occurring in developing countries associated with the market collapse of high-income countries, such as United States. So, in order to understand and evaluate the possible effects and consequences of financial crisis on developing countries, one has to assess the causes and consequences of market slowdowns in developed countries. From this perspective, the evaluation of developed country in time of crisis becomes important.

Developed Countries / USA and European Union
The main concern in few months after the crisis became a global issue was about how the high-income countries, which are the main shareholders of global market and power, have to respond to global financial crisis. Aiming to overcome the difficulties, the professional opinion shortly was formed suggesting essential recommendations that deal with governmental planning and policy. The dominating opinion states that the government has to recapitalize banks and assure safety of bank deposits and loans. Soon this became policy either in the European Union or United States of America, , . Among the professional recommendations in scopes of this paper is interesting the suggestion that concerns the policies in developed countries that directly affect economy of developing countries and their ability to react to financial crisis. Taking into consideration the economic costs of financial crisis and monetary costs of public sector response, the governments of high-income countries most probably experience the pressure of taxpayers and potential voters raising trade barrier in this manner, trying to cut international aid,. This will affect the international trade relationships therefore directly affecting developing countries. This vulnerable situation can affect not only the economical but also the political situation in either high-income developed countries or...
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