The increase of sub-prime (including Alt-A) loans as a share of the total from 2001-2005 was an important contributing factor to the economic crisis of 2008 because
A) these loans initially reduced the demand for housing.
B) these loans initially reduced housing prices.
C) the default and foreclosure rates on these loans are several times higher than conventional loans to prime borrowers.
D) the default and foreclosure rates on these loans are considerably lower than conventional loans to prime borrowers.

Question

Quizplus · Accepted Answer

The increase in sub-prime loans led to higher default and foreclosure rates, which contributed to the financial crisis by destabilizing the housing market and financial institutions.

The Increase of Sub-Prime (Including Alt-A) Loans as a Share