Asked by oluwatosin babalola on Jun 05, 2024
Verified
Partly because of subprime mortgages,the credit crisis came about.
Subprime Mortgages
Loans granted to borrowers with lower credit scores and a higher risk of default than prime borrowers, usually at higher interest rates.
Credit Crisis
A financial situation characterized by a severe shortage of credit or loans, leading to widespread financial instability and economic downturn.
- Explain the movement of money within the financial system and identify the functions of households and enterprises either as lenders or debtors.
Verified Answer
AR
Arior RichardsonJun 08, 2024
Final Answer :
True
Explanation :
The credit crisis, which became particularly severe in 2008, was partly caused by the widespread issuance of subprime mortgages, which are loans given to borrowers with poor credit histories. These risky loans were then repackaged into financial instruments that spread the risk throughout the financial system, leading to significant losses when many borrowers defaulted on their loans.
Learning Objectives
- Explain the movement of money within the financial system and identify the functions of households and enterprises either as lenders or debtors.
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