The Fed could have popped the bubble of the housing boom in the 2000s by:
A) lending directly to homeowners.
B) regulating the stock markets more.
C) reducing the growth rate of the money supply.
D) doing nothing.

Question

Quizplus · Accepted Answer

The best choice would be reducing the growth rate of the money supply. By limiting the availability of credit, the Fed could have slowed down the housing boom and prevented the bubble from growing to unsustainable levels. This would have required the Fed to take action, and not doing anything (choice D) would not have addressed the root cause of the problem. Neither lending directly to homeowners (choice A) nor regulating the stock markets more (choice B) would have been effective in this situation.

The Fed Could Have Popped the Bubble of the Housing