Describe how, according to some economists, the Fed's actions and the"global savings glut" both contributed to rising U.S. housing prices in the early 2000s
There are some economists who argue that the Fed set its federal funds rate target "too low" in the early 2000s. One of the consequences of this policy was that mortgage interest rates declined, which gave potential homeowners more of an incentive to borrow funds with which to purchase a house. The increase in demand for housing helped to push the price of housing upward.
Another contributing factor that some economists believe led to rising housing prices was the global savings glut. Emerging countries around the world began to save more, and some of these savings ended up in the United States. Savings creates the supply of loanable funds, so an increase in savings results in an increase in the supply of loanable funds. With a greater supply of loanable funds, interest rates fell. As mentioned above, lower interest rates motivate borrowers to take out a loan. As this impacted the interest rate on mortgage loans, the demand for housing rose and housing prices increased.
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a. True b. False Indicate whether the statement is true or false