Please make sure the answers are clear and understandable. Please check both the files before...

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Please make sure the answers are clear and understandable. Please check both the files before answering. Please include Harvard references if possible.

Komalavalli · Accepted Answer

1.
When national financial institutions default on debt repayments, a currency crisis generally ensues. Following World War I, for example, German banks borrowed huge sums of money from foreign lending organizations to aid in post-war reconstruction. International lenders (mostly American banks) withdrew loans to German banks as a result of the 1929 stock market crash and following financial crisis. However, owing to the instability of the German economy, German financial institutions were unable to fulfill their obligations. As a result, Germany faced catastrophic hyperinflation and a currency crisis, resulting in the fall of the government.
2. Banks generate money through a process called as credit generation. Banks can lend more money than they retain in deposits with the aid of credit creation. When banks lend this money to farmers, industry, small enterprises, and service providers, they are really assisting the economy in growing at an exponential rate. This, in turn, generates employment and purchasing power.

Please make sure the answers are clear and understandable. Please check both the files before answering. Please include Harvard references if possible.

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