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Chapter 1: Problem 29

What set off the Great Recession? \((\mathrm{LO} 4,6)\) a) The bursting of the housing bubble. b) The sharp decline in oil prices. c) The escalation of the war in Iraq. d) A surge in imports from China.

Short Answer

Expert verified
The correct answer is a) The bursting of the housing bubble.

Step by step solution

01

Understand the choices

Review each of the four options to determine which one best fits the cause of the Great Recession: a) The bursting of the housing bubble. b) The sharp decline in oil prices. c) The escalation of the war in Iraq. d) A surge in imports from China.
02

Check historical information

Research relevant historical information, such as economic trends, geopolitical events, and other factors that may have influenced the Great Recession.
03

Analyze the housing bubble

Consider how the housing bubble burst by evaluating mortgage practices, lending standards, and housing market trends before the Great Recession. It is important to recognize that subprime mortgages, unsustainable housing prices, and subsequent foreclosures led to a collapse in the housing market.
04

Evaluate other factors

Acknowledge the role of other factors, such as the decline in oil prices, the war in Iraq, and the surge in imports from China. Assess whether these events played a significant role in contributing to the Great Recession or if they occurred alongside it.
05

Select the answer

Choose the option that best matches the primary cause of the Great Recession based on the analysis of the aforementioned factors.
06

Answer

The correct answer is a) The bursting of the housing bubble.

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