Money, Banking, and Financial Markets Practice Test: Financial Crises and the Subprime Meltdown — Flashcards

A financial crisis occurs when assets or financial instruments significantly decrease in value, making it hard for businesses to meet their financial obligations. Financial crises are often caused by a period of economic boom and overextension of credit to borrowers. 

The subprime meltdown, or subprime mortgage crisis, was a multinational financial crisis that occurred between 2007 and 2010, and was the main trigger of the global financial crisis of 2008. The crisis began after the housing market collapsed, and many borrowers were unable to pay back their loans. This led to a severe economic recession, with millions of people losing their jobs and many businesses going bankrupt. The crisis also caused the stock market to fall, with the Dow Jones Industrial Average falling by more than half. 

The crisis was caused by a combination of factors, including:
The housing boom of the mid-2000s
Low-interest rates at the time
The collapse of the U.S. housing market 

The crisis spread around the world and was considered to be one of the worst crises after the great depressions of 1930s.