Economic Concepts Involved Essay

The economic concepts involved in this song are basically the acknowlight-emitting diodegment carts and the loans. Interest rates are also involved as well. Interest is charged by lenders as costs for the loss of the assets use. In the process of lending bills, the lender could have invested the funds instead of lending them out. With lending a large asset, the lender may have been able to bring income from the asset should they have decided to use it themselves.People started to take loans for housing purposes in America at that time. They wanted to buy houses or to invest these loans or to buy bonds so that they could get more money on returns. Investments are negatively related to interest rates. So when interest rates increases, investment ordain be high. They could also buy bonds with these loans. If interest rates are high, mensurate of money decreases and the bonds purchased by the people for future prospects will be of lesser value in present but when interest rates decl ines, bonds will be more profitable.THE FINANACIAL CRISIS IN AMERICAThe financial system in ground forces was coin by many factors among which the main was the change in ability to create new lines of credit rating. This made to dry up the reserve cash of the financial institutions and hinged their credit and ability to make new loans. Also, it must be noted that cheap credit made people to buy more houses or investments.This created more money in the market causing inflation. The increased loan packaging, market and incentives had prompted borrowers to presume difficult mortgages in the belief they would be able to quickly refinance at more favorable terms. But due to a drop in housing prices and rise in interest rate, difficulty in refinancing started. The consequences of this trend led to a huge loss of banks. The credit dried up, the housing market declined etc. The whole financial system was crushed.This song does not demonstrates the actual scenario of the USA crisis but it simply presents an outlook of a working man who is paying hard due to governments system.References-Cowboybleau, Single Review Shutting Detroit fell by John Rich. February 11, 2009.Available at http//countrycentral.wordpress.com/2009/02/11/single-review-shuttin-detroit-down-by-john-rich/Shakil-ur-Rahman,Mir. Overview of Economic Survey 2008-09.The NewsKarachi. June 12, 2009.Available at http//www.thenews.com.pk/daily_detail.asp?id=182548Interest Rate at Investopedia. Available at http//www.investopedia.com/terms/i/interestrate.asp