Cause and effect 2009 Financial Crisis

What were the main factors contributing to the housing bubble in the United States?

• Strict lending standards and low demand for housing

• Low interest rates, high demand for housing, and easily available loans

• High interest rates and strict lending standards

• High interest rates and low demand for housing

What happened when the Federal Reserve began to raise interest rates in 2006?

• People had access to cheaper loans

• People no longer had access to cheaper loans

• Banks suffered huge profits

• Homeowners were able to afford mortgage payments

Why were homeowners unable to sell their houses after the housing bubble burst?

• The houses had less value than when they were bought

• The houses were easily sold

• The houses had more value than when they were bought

• The houses were in high demand

What contributed to the fall in house prices after the burst of the housing bubble?

• A decrease in the demand for houses

• A decrease in the supply of houses

• An increase in the supply of houses

• An increase in the demand for houses

Why did the subsequent burst of the housing bubble spread across the whole finance industry?

• Due to an increase in regulation in the finance industry

• Due to the overall deregulation in the finance industry

• Due to the decrease in profit made by companies

• Due to the decrease in subprime loans

What led to a decline in the standards for taking out loans and mortgages?

• A decrease in the demand for housing

• A decrease in interest rates

• An increase in the standards for taking out loans

• A high demand for housing and loans made available to all households

What were the characteristics of the loans offered during the housing bubble?

• Fixed interest rates and need for refinancing later

• Flexible interest rates and need for refinancing later

• Flexible interest rates and no need for refinancing

• Fixed interest rates and no need for refinancing

Why did many companies begin to invest in subprime loans?

• Due to the decrease in the availability of subprime loans

• Due to the decrease in profit made by companies

• Due to the increase in the availability of subprime loans

• Due to the profit made, which could be used for further loans

What did mortgage lenders try to do to recover their loans after the burst of the housing bubble?

• Increase the value of houses

• Sell off houses to recover their loans

• Sell off houses to decrease demand

• Decrease the value of houses

What was the result of the overall deregulation in the finance industry?

• A decrease in the spread of the housing bubble

• A fall in house prices

• A decrease in the profits made by banks

• The spread of the housing bubble across the whole finance industry