Asked by Tiffani Duncan on Jul 03, 2024
Verified
The financial meltdown of 2008-2009:
A) was accurately predicted by an economic model.
B) was due to excessive investment in Internet companies.
C) was the result of the breakup of the European Union.
D) resulted partially from a faulty economic model.
Financial Meltdown
An extreme financial crisis characterized by rapid devaluation of assets and major institutions' failures, leading to economic downturns.
Economic Model
An economic model is a simplified theoretical construct that represents economic processes, mechanisms, and variables to analyze and predict economic behaviors and outcomes.
- Recognize the limitations and potential inaccuracies of economic models, especially when based on faulty assumptions.
Verified Answer
SH
Samantha HernandezJul 08, 2024
Final Answer :
D
Explanation :
The financial meltdown of 2008-2009 resulted partially from a faulty economic model. The prevailing economic model failed to account for the risks associated with the subprime mortgage market, and this led to the creation of complex financial instruments that were not properly understood or regulated. As a result, many banks and financial institutions suffered significant losses, leading to a widespread economic downturn. While there were other contributing factors, such as the housing market bubble and excessive risk-taking, the faulty economic model was a key underlying cause of the crisis.
Learning Objectives
- Recognize the limitations and potential inaccuracies of economic models, especially when based on faulty assumptions.