M7A2 Montery Policy ECO201 Stephanie

M7A2 Montery Policy ECO201 Stephanie - Running Header:...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Stephanie Littlejohn June 22, 2011 Macroeconomics Module 7 Assignment 2 In 2001, the Federal Reserve responded to the recessionary conditions in the nation by sharply reducing interest rates and keeping them historically low. This resulted in an increase in the nation’s money supply from –3.1 percent in 2000 to 8.7 percent in 2001. In 2004, the Chairman of the Federal Reserve, Alan Greenspan, suggested that lenders “provide greater mortgage product alternatives to the traditional fixed rate mortgage.” Banks responded by lending billions of dollars to borrowers, using adjustable rate mortgages (ARMs), in which rates fluctuate over the life of the loan and are linked to an economic index, such as United States Treasury securities. These loans were provided to many borrowers who may not have qualified for traditional fixed rate loans, whose monthly initial payments were higher. I believe that the Fed made this decision to increase the demand for money and bring the economy out of a recession to equilibrium, where supply equals demand. 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

M7A2 Montery Policy ECO201 Stephanie - Running Header:...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online