Question

of the great recession?

causes of the great recession
banks gave subprime mortgages to borrowers with low credit ratings.
the demand for houses dropped, and borrowers were unable to pay back their loans.
?

a. tech stocks lost most of their value when the dot-com bubble burst.
b. banks werent able to lend money, and homeowners decided to pay down debt rather than spend money.
c. the federal government freely gave money to large banks.
d. government tax cuts for the wealthy led to income inequality.

Explanation:

Analyze the graphic organizer

The graphic organizer lists the chronological causes of the Great Recession:

1. Banks gave subprime mortgages to borrowers with low credit ratings.
2. The demand for houses dropped, and borrowers were unable to pay back their loans.
3. The next logical step in this chain of events is that banks suffered massive losses, leading to a credit freeze where they were unable or unwilling to lend money, forcing consumers to pay down debt instead of spending.

Evaluate the options

• Option A refers to the dot-com bubble burst, which occurred in 2000, prior to the Great Recession.
• Option B correctly describes the immediate consequence of the mortgage defaults: banks lost capital, leading to a credit freeze ("weren't able to lend money") and a subsequent drop in consumer spending.
• Option C is incorrect because the government did not "freely" give money to banks to cause the recession; emergency bailouts (like TARP) were a response to the crisis, not a cause.
• Option D describes a general economic trend but does not directly connect to the specific housing market collapse sequence shown in the organizer.

Answer:

• (A) Tech stocks lost most of their value when the dot-com bubble burst.
• (B) Banks weren't able to lend money, and homeowners decided to pay down debt rather than spend money. (Correct answer)
• (C) The federal government freely gave money to large banks.
• (D) Government tax cuts for the wealthy led to income inequality.