Question

1. Explain succinctly how the decline in housing price level led to a major financial crisis in 2008-9 in U.S.

Answer 1

The financial crisis was triggered by the multitudes of the factors. The housing crisis was one of them. The banks and financial institutions were giving loans to such borrowers who were having the adverse credit history. These loans moreovers were unproductive.

These sub prime borrowers defaulted and financial health of banks got deteriorated. Many banks failed as the people defaulted in the large scale. Thereafter, crisis spreaded to other industries and sectors.