Blog: Mgmt629 GDB Solution

ANSWER:

Country-specific Measures

 All of the above, countries should decrease their interest rates to overcome resulting unemployment world wide.

 Governments should recapitalize their domestic banks and other firms.

 Central Banks have to increase capital for small and medium investments in order to boost domestic investments.

 Fiscal restraint should also be exercised in order to cut subsidies on imports and cut expenditures. Fiscal restrictions should be imposed on import of luxury products.

 Countries should also improve domestic resource mobilization.

Global Measures

 Macroeconomic policy and structural reforms have to be implemented. Countries need to undertake comprehensive review of regulatory and supervisory control. Particularly all sectors of financial industry should be properly regulated to avoid excessive risk taking by institutions.

 Developed countries have to adopt fiscal stimulus packages to boost their economies but very little attention has been paid to the need to boost demand in developing and under developed countries. Rich countries should pass aid and debt packages for developing nations.

 The more important thing is to reform global financial system. In my view Capitalism has proven failed for the world economy as was the socialism. So now there is a need that all the leading economies gathered round a table and sort out a new and improved economic system out of socialism and capitalism. By summarizing the good ones of both economic systems, we can reform a new and improve economic system.