Financial Crisis And Soverign Debt

Question 1

What did deregulation of financial markets do?

Answer 1

Encouraged new ways of lending
Made it easier for lenders to access funds
the relatively benign economic climate of early 2008 encouraged banks to become more risk seeking

Question 2

What helped increase property prices?

Answer 2

Banks lending increased rapidly

Question 3

What did Central banks do?

Answer 3

Increasing IR to control inflation

• defaults on sub prime mortgages increases
• credit tightens

Question 4

Economic bubble

Answer 4

When prices of assets and securities increase way above their true/fundamental value