Some experts have argued that the Fed contributed to the housing bubble by:
A)approving the purchase of high-risk assets by banks, even though there was a risk of them defaulting.
B)lowering interest rates, despite the fact that the Taylor rule indicated keeping them high.
C)not regulating non bank financial institutions who were coming up with innovative mortgages.
D)following the Taylor Rule, which during the 2000s indicated that rates should be kept low.

Question

Quizplus · Accepted Answer

The Fed lowered interest rates significantly in the early 2000s, which some experts argue deviated from the Taylor Rule's guidance to keep rates higher, contributing to the housing bubble by making borrowing cheaper and encouraging excessive risk-taking.

Some Experts Have Argued That the Fed Contributed to the Housing