Some Experts Have Argued That the Fed Contributed to the Housing

question 206

Multiple Choice

Some experts have argued that the Fed contributed to the housing bubble by:

• A)approving the purchase of high-risk assets by banks, even though there was a risk of them defaulting.
• B)lowering interest rates, despite the fact that the Taylor rule indicated keeping them high.
• C)not regulating non bank financial institutions who were coming up with innovative mortgages.
• D)following the Taylor Rule, which during the 2000s indicated that rates should be kept low.

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Definitions:

Given Event

An occurrence or outcome within a probability space that has a specified probability attached to it.

Independent Events

Two or more events whose outcomes do not affect each other, meaning the occurrence of one event does not change the probability of the other.

Probability

A measure of the likelihood that an event will occur, expressed as a number between 0 and 1, where 1 indicates certainty.

Marginal Probability

The probability of an event occurring, irrespective of the outcomes of other variables.