In an Emerging Market Economy, a Lending Boom and Crash

question 16

Essay

In an emerging market economy, a lending boom and crash are not inevitable outcomes of financial liberalization and globalization. Discuss when a boom and crash will occur, and how it can be avoided.

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Definitions:

Double Entry

An accounting principle that requires every financial transaction to be recorded in two accounts, debit and credit, to keep financial statements balanced.

Balance Sheet

A balance sheet that presents a firm's financial position, detailing its assets, liabilities, and owners' equity at a particular moment.

Current Liabilities

Short-term financial obligations of a company that are due to be paid within one year.

Retained Earnings

The portion of net income which is retained by the corporation rather than distributed to its owners as dividends.