nalyze 1 of the following government intervention programs: Countercyclical fiscal policies (countering economic disruptions such as the housing bubble and the Great Recession) US agriculture support...

Great Recession and Housing Bu
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Aside from pursuing the social purpose of income redistribution, governmental intervention in the market normally makes sense only when there is a market failure in a case where the market leads allowances. What is a common reason of market failure? Externalities are defined by economists as situations in which economic agents are directly and indirectly impacted by the activities of others. One excellent example is a polluting industrial plant. A "pecuniary externality" is a sort of externality that causes inefficient market allocation even though traders are only influenced by others' activities through price fluctuations. Chief price adjustments that harm particular parties do not always indicate that the market has failed. In the developed banking model established by economists Douglas Diamond and Philip Dybvig, cu
ency externalities contribute to illiquidity (DD). Because widespread liquidity was a major driver of volatility and government involvement during the 2007-2008 financial crises, monetary externalities have received a lot of attention recently.
In the DD model, banks assist depositors in reducing the trade-off between liquidity and return by investing deposits in the optimal mix of low-yielding liquid assets and high-yielding illiquid assets. Despite holding illiquid assets, banks may offer depositors with access to their monies on demand since not all depositors typically desire to take their funds at the same time. Banks provide liquidity protection to depositors by tolerating mismatches between the maturities of their liabilities and assets, fast money while also allowing them to profit from the high rates earned by their deposits Invest in illiquid assets.
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ency externalities can occur under the DD framework if illiquid financial institutions can trade with more liquid market players in the event of a shock. Liquid players who do not have an immediate need for liquidity will be ready to trade their liquidity in order to earn greater returns from illiquid institutional portfolios in addition to profits from illiquid assets they directly own. Liquid institutions may thus expect greater returns from illiquid portfolios while remaining confident in their ability to acquire liquidity in the market in the event of a shock while their assets are trapped in illiquid investments.
Because the high profits generated by illiquid institutions contribute to insufficient liquidity in the entire financial market, the likelihood of this form of revaluation reflects an external factor. Indeed, given the old market's liquidity, not just some, but all institutions choose a previously illiquid portfolio position. While everyone tries to take advantage of the market's liquidity, the initial investment in illiquid assets is too high as a whole, i.e. the term does not match excessively, resulting in resale prices assets that are too small and an inefficient market for allocating investments and funds. This mi
ors the real-world trend of overinvestment followed by "burnout,"...