Question

Why did the 2007 U.S. subprime crisis spread rapidly?

A. Banks in other countries failed to measure the risk of real estate derivatives.

B. The United States had a large current account surplus.

C. The United States adopted the fixed exchange rate system.

D. The Fed failed to act at the right time.

E. There was speculation against the U.S. dollar

Answer 1

Option d is correct

The fed failed to act at the right time.

Because

Banking penics where at the the genesis of a number of financial crisis of the 19th 20th and 21st centuries many of which lead to recession or depressions. Federal reserve having anticipated ammayila reservation that begin in 2001 they reduced the federal fund rate from 6.5% to 1.75 percent. That significant decrease enabled banks to extend consumer credit at a lower price rate.and encourage them to lend even to subprime for high risk customers through at higher interest rate.