Q82 (CDS-I/2019) Economy › Money, Banking & Inflation › Financial markets overview Answer Verified

Sub-prime crisis' is a term associated with which one of the following events?

Result

Your answer: — · Correct: A

Explanation

The term 'sub-prime crisis' refers to the 2007–2008 financial crisis that originated in the United States mortgage market. It was triggered by the collapse of the housing bubble and the failure of sub-prime mortgage-backed securities, which were high-risk loans granted to borrowers with poor credit histories [4]. This crisis led to the bankruptcy of major financial institutions and a severe global liquidity crunch [3]. Consequently, it catalyzed the 'Great Recession,' the deepest economic downturn since the 1930s, characterized by high unemployment and negative economic growth [2]. While factors like growing inequality and deregulation are debated as underlying causes, the term is most directly and fundamentally associated with the resulting economic recession that impacted global markets [2]. Credit rating agencies were also criticized for failing to properly evaluate the risks associated with these sub-prime derivatives.

Sources

[4] https://www.ilo.org/sites/default/files/wcmsp5/groups/public/@ed_protect/@protrav/@travail/documents/publication/wcms_187497.pdf
[3] https://pmc.ncbi.nlm.nih.gov/articles/PMC10009346/
[2] https://www.rba.gov.au/education/resources/explainers/the-global-financial-crisis.html

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Sub-prime crisis' is a term associated with which one of the following events?

Explanation

SIMILAR QUESTIONS

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