Final Project Part Two
Embry-Riddle Aeronautical University
October 1, 2015
Is the Federal Reserve Accountable for sub-prime market economic disaster and its sustainability in a post disaster U.S economy?
The most commonly known sub-prime finance crisis came into illumination when a sudden rise in home foreclosures in 2006 twirled seemingly out of control in 2007, triggering a nationwide economic crisis that went worldwide within the year. The greatest responsibility is pointed at the lenders who created such problems. It was the lenders who, at the end of the day, lend finances to citizens with poor credit and a high risk of failure to pay. When the Feds inundated the markets with growing capital…show more content… The sub-prime crisis affected, not only to the US, but it’s footpath across the world. The economic financial system across the world experienced suffering very badly, thereby leading the deteriorating of the economy. According to numerous economists, the crisis of 2008 was the most severe economic contraction, despite the fact that it is less than the Great Depression. To preserve financial policy steadiness, Federal Reserve applied conservative financial policy stimulus thereby decreasing the federal resources rate to almost zero and becoming the “lender of the last resort”. Fed created this new loan program to improve the deteriorating financial system.
In this paper, we will be using the log-log model. The log-log model used for the demand for wealth (attuned for inflation). We will be using the M1, as a display, for demand on wealth and interest rate as the illuminating variable affecting the demand for wealth. Using the regression, we will study the hypothesis. For this paper, the hypothesis used will talk about the connection between money and the interest rate. The null hypothesis, in this case, will be the interest affecting the demand for money in the economy. The data that we will be reviewing is from October 2008 to October 2011, 3 years worth of data. This connection will give us the basic understanding of the performance of the monetary policy in US economy after the crisis.
In response to the financial disaster that had occurred