The Question : Summarize the causes and effects of the recession that began in the mid-2000s
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So what is the correct answer? Answer:
Also known as the Great Recession, it began around 2006-2007 within the United States and quickly spread to most major economies in the world.
The causes of the Great Recession began in the United States, when a lot of people who were not eligible for mortgage were given loans to buy homes. The US government’s through Fannie Mae and Freddy Mac wanted to provide cheap housing for as many people as possible.
Through Big banks, they were able to provide risky loans to as many people as possible. This eventually gave rise to a huge construction boom and Financial institutions in New York and around the world, started to take advantage of this boom and sell more and more financial instruments.
However, as these home owners began to default on their payments, they were forced to give up their homes, consequently disturbing the whole constriction boom and effecting everyone who had invested in these projects.
The exposure was felt around the world as multi-billion hedge funds, investors and huge retirement funds has invested in these.
The stock market crashed, thousands of people went bankrupt and many large companies including Lemming Brothers collapsed after 100 years of operation.
For the next 5 years, most industrialized countries in the world struggled to coupe with the recession. Unemployment rose, countries defaulted, which also effected the retail industry. It took years before business confidence could rise again.
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