How Did the Collapse of the Housing Bubble Cause a Contraction

question 119

Multiple Choice

How did the collapse of the housing bubble cause a 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) When banks wanted to make loans, but couldn't find any credit-worthy customers to loan to.

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Definitions:

Clayton Act

A United States antitrust law, passed in 1914, aiming to prevent exclusive sales contracts, corporate mergers, and other practices that restrict competition.

Celler-Kefauver Act

A United States antitrust law passed in 1950, aimed at preventing anti-competitive mergers by closing loopholes relating to asset purchases.

Sherman Act

is a foundational antitrust law in the United States aimed at preserving competition by prohibiting monopolies, cartels, and other forms of anticompetitive practices.

Restraint Of Trade

Legal doctrine that restricts the ability for parties to freely conduct business, often related to antitrust issues and competition law.