the answer is b recession because Starting in mid-2007, the global financial crisis quickly metamorphosed from the bursting of
the housing bubble in the US to the worst recession the world has witnessed for over six
decades. Through an in-depth review of the crisis in terms of the causes, consequences and
policy responses, this paper identifies four key messages. Firstly, contrary to widely-held
perceptions during the boom years before the crisis, the paper underscores that the global
economy was by no means as stable as suggested, while at the same time the majority of
the world’s poor had benefited insufficiently from stronger economic growth. Secondly, there
were complex and interlinked factors behind the emergence of the crisis in 2007, namely
loose monetary policy, global imbalances, misperception of risk and lax financial regulation.
Thirdly, beyond the aggregate picture of economic collapse and rising unemployment, this
paper stresses that the impact of the crisis is rather diverse, reflecting differences in initial
conditions, transmission channels and vulnerabilities of economies, along with the role of
government policy in mitigating the downturn. Fourthly, while the recovery phase has
commenced, a number of risks remain that could derail improvements in economies and
hinder efforts to ensure that the recovery is accompanied by job creation. These risks pertain
in particular to the challenges of dealing with public debt and continuing global imbalances.