Which statement best describes the main cause of the 2008 housing market crash in the United States?

• A. Widespread issuance of subprime mortgages and excessive risk-taking by financial institutions
• B. A sharp rise in oil prices leading to higher transportation costs
• C. A sudden increase in government spending on infrastructure projects
• D. Strict lending standards imposed by banks

Answer: (A)

Verified step by step guidance

1. Understand the context of the 2008 housing market crash, which was primarily a financial crisis related to the housing sector in the United States.
2. Identify the key factors that contributed to the crash, focusing on the role of mortgage lending practices and financial institutions' behavior.
3. Recognize that subprime mortgages are loans given to borrowers with poor credit histories, which carry higher risk of default.
4. Analyze how widespread issuance of these risky subprime mortgages increased the likelihood of defaults, which in turn affected financial institutions holding mortgage-backed securities.
5. Conclude that excessive risk-taking by financial institutions, combined with the proliferation of subprime mortgages, was the main cause of the crash, rather than factors like oil prices, government spending, or strict lending standards.