How Did the Collapse of the Housing Bubble Cause a Supply-Side

question 69

Multiple Choice

How did the collapse of the housing bubble cause a supply-side driven contraction in output?

• A) Because banks were unwilling to lend, many businesses were suddenly unable to access credit for their day-to-day needs.
• B) When homeowners lost value in their homes, they stopped saving, which reduced banks' ability to lend.
• C) Because consumers lost confidence in the banking industry, they stopped depositing money, so banks could no longer lend.
• D) Banks wanted to make loans, but couldn't find any credit-worthy customers to loan to.