PSC 412 Lecture Notes - Lecture 10: Quantitative Easing, Toxic Asset, Federal Funds Rate
6 Nov 2016
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The 2008 eco(cid:374)o(cid:373)ic crisis i(cid:374) the u(cid:374)ited states. Easy credit: 2000-2003; very easy credit at this time. Banks can take an outline, when they spend too much. When lowering interest rates, they want to look at aggregate demand (ad). Us current account deficit rises from 1. 5% to 5. 8% of gdp. Further, encourage people to take out loans to not make recessions worse, and spend money. By not coming in, the interest rates are very low! Maker of loans- want to make more loans. Going from a 30 yr. to a 50 yr. payment of a loan so more people can afford it. If people do not pay, banks take their house away! Makers and holders were separated of loans; makers gave banks their loans, selling the incentives lowering them. People may get loans who do not need them. Government- actors push for expanded home ownership; frannie mae and frannie mac. The fed has lowered the ffr in the early 2000s.
