The 2008 credit crunch occurred when banks reduced lending in response to
A)the loss of asset value for mortgage backed securities and mortgage loans.
B)having too little capital to satisfy capital requirements.
C)an excess of bank capital.
D)an increase in the required reserve ratio.

Question

The 2008 credit crunch occurred when banks reduced lending in response to
A)​the loss of asset value for mortgage backed securities and mortgage loans.
B)​having too little capital to satisfy capital requirements.
C)​an excess of bank capital.
D)​an increase in the required reserve ratio.

Quizplus · Accepted Answer

Banks reduced lending in response to the loss of asset value for mortgage backed securities and mortgage loans, which caused a drop in confidence and liquidity in the financial system, leading to the credit crunch.

The 2008 Credit Crunch Occurred When Banks Reduced Lending in Response