Complicated financial derivatives allowed many investors to bet a lot of money on the U.S. housing market, so when the bubble burst, the damage was much greater.

Solved

The Federal Reserve

Question 45

Multiple Choice

The Federal Reserve

A) did not pay close enough attention to derivatives in the period leading up to the financial crisis.
B) should not have promoted the use of complicated financial derivatives the way it did during the financial crisis.
C) could have prevented the financial crisis through the use of complicated financial derivatives.
D) is not legally authorized to monitor or regulate complicated financial derivatives.

Correct Answer: