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1Apply: Economic Events Influence on Economic Activity AnalysisAngela KirkendallUniversity of PhoenixECO/535October 12, 2020Alan Lane-Murcia
2Apply: Economic Events Influence on Economic Activity Analysis. In 2007, the U.S. economy had suffered through millions of individuals losing their jobs and their homes because the housing market plunged. Before the housing market took its plunge in 2007, the average cost of housing was actually increasing rapidly starting in 1990 up until the plunge. Lenders at banks were extending credit loosely. This involved lending to borrowers with higher debt to income. Having a high debt to income is not a good thing when it comes to being lent money. It means there is less money that the borrower has to repay the loan in full. Due to those rising home prices, loose lending practices, and the influx of mortgages, pushed the prices to unfeasible levels. With that combination, people were having to foreclose or default on their mortgages. This is what caused the crash.