The Federal Reserve is blamed by some for the recession of 2007-2009 because it

Question

Quizplus · Accepted Answer

Keeping interest rates too low prior to 2005 led to a housing boom, which eventually resulted in the recession of 2007-2009. This is because the low-interest-rate environment encouraged consumers to borrow more, leading to soaring house prices and a sharp increase in mortgages and housing debt. When home prices finally collapsed, many homeowners found themselves with negative equity or unable to repay their mortgages, causing widespread defaults, foreclosures, and a credit crunch. Therefore, the Federal Reserve's policies of maintaining low interest rates for an extended period created an unsustainable housing bubble, which ultimately burst and triggered a severe economic crisis.

The Federal Reserve Is Blamed by Some for the Recession