Question: a) Explain how an amplification mechanism may have been created from mortgage losses to the effect on the economy. What three factors may have contributed? Explain each.
b) Explain the process of a financial crisis - how does it usually start, and how do events then lead to the crisis spreading from "Wall St to Main St"? Explain also why once the process begins it may feed on itself. Use of a diagram may be helpful.
c) Explain how the two major responses to the crisis were meant to interrupt the process you have described above.