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One of the financial innovations that allowed an expansion of the supply of credit that inflated...

One of the financial innovations that allowed an expansion of the supply of credit that inflated a real estate bubble in the US in the 2000s was...

Advancements in digital payments

The invention of the internet

Securitization of debt - especially morgages

Growth of the commercial paper market
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Answer #1

Securitization of debt - especially mortgages -

The most major reason that allowed an expansion of the supply of credit that inflated a real estate bubble in the US in the 2000s was the growth of securitization especially of the mortgages. In such securitization, mortgages of different profiles, maturity, and geographies were clubbed together as a securitized asset and sold to the investors. The crux is that mortgages which were risky on a standalone basis were clubbed with other assets, and sold as highly rated securitized assets. Due to the high ratings, there were many buyers of such securitized assets, thus creating a bubble of real estate.

The other options are not related to the real estate bubble.

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