Review the U.S. housing market and at least two other key financial markets or institutions and use course materials or the Internet to conduct your research. Review the factors that contributed to the growth of mortgaged-backed securities in the run-up to the U.S. housing bubble.
- What additional financial markets did you research? How did these markets react to the changing economy?
- What notable factors contributed to the growth of mortgage-backed securities?
- What factors led to a decrease in supply of those securities, while increasing the associated default risk?
- How does the U.S. government's deficit impact both the supply of loanable funds in the U.S. economy and real interest rates?
- Despite high government deficits by historical standards, low nominal interest rates are also present. How can we explain this?