Why did the fall in housing prices lead to bank failures in the U.S. during 2007-2009?
What will be an ideal response?
Falling housing prices led to mortgage delinquencies during 2007-2009. Many people stopped making payment for their mortgages either because they did not have money to pay or because they realized that it was not optimal to keep paying interest on a mortgage that vastly exceeded the value of the home. As a result, the number of home foreclosures increased and banks had no way of recouping the money as the foreclosed houses had to be sold at prices much below their original value.
You might also like to view...
If we compare the four sources of spending in the economy we see that
A) household consumption is the smallest. B) government expenditure is the largest. C) business investment is the largest. D) household consumption is the largest.
Which type of firm produces the largest share of manufacturing output?
A) proprietorships only B) partnerships only C) corporations only D) Proprietorships and corporations are tied.