ECONOMICS
FEDERAL RESERVE
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Too much regulation in the US financial sector
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Not enough money flowing around in the economy
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Thousands of “sub-prime” loans made by banks looking for quick profit
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A decrease in taxing by the federal government
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Detailed explanation-1: -Deregulation in the financial industry was the primary cause of the 2008 financial crash. It allowed speculation on derivatives backed by cheap, wantonly-issued mortgages, available to even those with questionable creditworthiness.
Detailed explanation-2: -The subprime mortgage crisis of 2007–10 stemmed from an earlier expansion of mortgage credit, including to borrowers who previously would have had difficulty getting mortgages, which both contributed to and was facilitated by rapidly rising home prices.
Detailed explanation-3: -What was the subprime mortgage crisis? The subprime mortgage crisis occurred from 2007 to 2010 after the collapse of the U.S. housing market. When the housing bubble burst, many borrowers were unable to pay back their loans. The dramatic increase in foreclosures caused many financial institutions to collapse.
Detailed explanation-4: -Over the short term, the financial crisis of 2008 affected the banking sector by causing banks to lose money on mortgage defaults, interbank lending to freeze, and credit to consumers and businesses to dry up.