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• Financial Crises and Economic Thought

   How The 2008 Financial Crisis was Connected to the Mortgage Market.

  According to Li and Wei (2020), the subprime mortgage crisis was a global financial constraint that lasted from 2007 through 2010, leading to the famous 2008 U.S financial crisis marked at the peak. During this financial crisis, speculations hold that its cause was a decline in home prices from a fall in the housing bubble. This state further led to housing delinquencies and a reduction in mortgage values. 

  The History of the Many Financial Crises

  In economic history, the world has marked five major historical crises. The first crisis is the credit crisis of 1772 that originated in Britain before it spread to the rest of the world (Kim et al., 2020). The second is the great depression of 1929, attributed to the Wall Street crash and the U.S government’s flawed policies. Other economic crunches recorded in history are the OPEC Oil Price Shock in 1973, the Asian crisis in 1997, and the World Financial Crisis of 2008.

   Minsky’s Financial Instability Hypothesis

  Hyman Minksy formulated the financial instability hypothesis. According to this hypothesis, the financial crisis is depicted to be endemic in capitalism, given the recklessness of borrowers and lenders in the event of economic prosperity (Uthayakumar et al., 2020). About this hypothesis, success is always followed by success than the crisis in the third cycle. In this case, the presence of economic stability is an indication of coming instability.

  The Problems with the Neoclassical Model

  The neoclassical model is an economic term for economic approaches to determine prices, output, and income distribution across different markets. Generally, this model is disputed following its application of the demand, supply, and maximization as the rationale for predicting an economy’s patterns. Generally, this approach is ideal and cannot account for its mathematical and ordinary language use to predict an economy’s trends.

  How Students Have Responded to the 2008 Financial Crisis.

  Given the variation in explaining economic crises, students have responded differently to the 2008 financial crisis and its causes.