During April 2009, U.S. Federal Reserve vice-chair Janet Yellen discussed these paradoxes: "Once this massive credit crunch hit, it didn’t take long before we were in a recession. The recession, in turn, deepened the credit crunch as demand and employment fell, and credit losses of financial institutions surged. Indeed, we have been in the grips of precisely this adverse feedback loop for more than a year. A process of balance sheet deleveraging has spread to nearly every corner of the economy. Consumers are pulling back on purchases, especially on durable goods, to build their savings. Businesses are cancelling planned investments and laying off workers to preserve cash. And, financial institutions are shrinking assets to bolster capital and improve their chances of weathering the current storm. Once again, Minsky understood this dynamic. He spoke of the paradox of deleveraging, in which precautions that may be smart for individuals and firms—and indeed essential to return the economy to a normal state—nevertheless magnify the distress of the economy as a whole." COUNT 5
QSN1 Who was the U.S. Federal Reserve vice-chair in April 2009? ANS1 Janet Yellen QSN2 What happened soon after the massive credit crunch hit? ANS2 we were in a recession QSN3 What deepened the credit crunch when demand and employment fell? ANS3 recession QSN4 What was one of the actions businesses took to preserve cash? ANS4 cancelling planned investments QSN5 What occurred in nearly every corner of the economy after the financial crisis of 2007? ANS5 balance sheet deleveraging