Identify and describe the causes and effects of the 2008 global financial crisis on the U.S. economy. How did the effects of the crisis on the U.S. economy compare to the effects of the crisis on other states?

Question

What will be an ideal response?

Answer 1

Answers should identify the cause of the economic crisis as the “bubble” burst in the real estate market from home loans being offered at subprime interest rates with little regard for the credit worthiness of borrowers. When these homeowners defaulted on their mortgages, the foreclosures triggered a cascade of bank failures and the collapse of major investment firms and prompted a $700 billion dollar bailout. Answers should address the effects of the crisis on the U.S. economy as a rapidly growing budget deficit, plummeting trade levels, extensive recovery costs, and high unemployment. Answers may also address how the financial crisis raised doubts about the liberal model of political. Many of these consequences applied to other states outside of the U.S.