What was the chain of events that occurred in 2008-2009 when the U.S. "housing bubble collapsed"?
A) Home prices rose out of the reach of households; home sales fell; and banks were left with no borrowers for their excess reserves, creating a crisis for banks.
B) Savings increased, leading to less investment in homes; a lower demand for homes caused drops in home prices, which led to unemployment in the construction industry.
C) Interest rates on mortgages rose, which caused homeowners to default on these loans, causing losses to financial firms, investors, and banks.
D) Banks foreclosed on mortgage loans, which caused housing prices to drop, which led to interest rates rising so that homes became unaffordable.

Question

Quizplus · Accepted Answer

The housing bubble collapse was caused by a combination of factors, including rising interest rates, subprime lending practices, and overinflated home prices. As homeowners began defaulting on their mortgages, financial institutions and investors suffered losses, leading to the wider economic recession of 2008-2009. The other choices in the question do not accurately reflect the sequence of events that occurred during the housing bubble collapse.

What Was the Chain of Events That Occurred in 2008-2009