The Fed responded to the 1997-2006 housing boom by:
A) keeping monetary policy too tight for too long.
B) holding easy monetary policy for too long.
C) applying a monetary policy rule that targets a zero inflation rate.
D) actively regulating the housing and lending industries.

Question

Quizplus · Accepted Answer

The Fed held easy monetary policy for too long, which contributed to the housing boom and eventual bust. Lower interest rates made it easier for people to borrow and purchase homes, which drove up home prices. The Fed could have taken measures to tighten policy earlier to cool off the housing market, but they did not do so.

The Fed Responded to the 1997-2006 Housing Boom By