When the Federal Reserve lowered interest rates following the 2001 recession, what did more people start to do?
A. buy homes
B. default on loans
C. invest in dot-coms
D. sell stock shares
I say B
To determine the correct answer, let's break down the question:
The question asks what people started doing when the Federal Reserve lowered interest rates following the 2001 recession. To find the answer, we need to consider the impact of lowering interest rates and how it typically influences people's behavior.
Lowering interest rates makes borrowing money more affordable, as it reduces the cost of borrowing. This can lead to increased spending by individuals and businesses.
Now, let's evaluate each option:
A. Buying homes: Lower interest rates generally incentivize people to purchase homes because it becomes cheaper to obtain a mortgage. However, this option might not be the best choice in this context as the question is specifically asking about what people started doing as a result of the Federal Reserve lowering interest rates.
B. Defaulting on loans: This option suggests that more people started defaulting on loans after the interest rate cut. Defaulting on loans typically occurs when people are unable to repay their debts and can be a result of financial stress or economic downturns. However, since the question mentions the Federal Reserve lowering interest rates, it is unlikely that this would lead to an increase in loan defaults.
C. Investing in dot-coms: This option mentions investing in dot-coms, which refers to internet-based companies popular during the late 1990s and early 2000s. However, the question specifically asks about the impact of lowering interest rates, and it is unlikely that it would directly lead to an increase in investments in a particular industry, especially one that was already declining at the time of the 2001 recession.
D. Selling stock shares: This option suggests that more people started selling stock shares after the interest rate cut. Lower interest rates can make alternative investments, such as bonds or real estate, less attractive, leading some investors to sell stocks and move their funds to these alternatives. However, this option is less likely as a direct consequence of the Federal Reserve lowering interest rates.
Based on this analysis, option B, defaulting on loans, seems less likely as a result of the Federal Reserve lowering interest rates. Therefore, the correct answer would be A. More people started buying homes when the Federal Reserve lowered interest rates following the 2001 recession.