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Chapter 1: Q.2DQ (page 2)

What effect did the recession of 2007–2009 have on government regulation?

Short Answer

Expert verified

Answer:

The government passed the Dodd-Frank Act to increase transparency and accountability in the financial system.

Step by step solution

01

Step 1:Impact of the 2007-2009 recession

The 2007-2009 recession decreased the GDP by 4.3% andthe unemployment increased by 4.5%. Economy faced severe inflation and financial markets collapsed.

02

Step 2: The need for a regulatory framework

The 2007-2009 recession occurred due to the inability of the government to appropriately regulate the financial markets. This recession could have been avoided if relevant regulations were used to monitor the financial sector.

03

Step 3: The Dodd-Frank Act passed by the government

The government passed the Dodd-Frank Act to increase its regulatory power over the financial sector. This act helped to maintain the stability of the financial sector, and control any hazards and risks present in the financial sector.

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