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Controlled Debt Levels

1. How would a more controlled access to credit by firms and individuals have reduced the over leveraging of businesses and individuals and decreased the likelihood of the recent economic downturn?

2. Is the long term survival of the United States economy at risk because of the United States government's level of debt and the amount of that debt held by foreign entities such as China? Why or why not?

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1. How would a more controlled access to credit by firms and individuals have reduced the over leveraging of businesses and individuals and decreased the likelihood of the recent economic downturn?

The recent great recession has been mainly attributed to have originated from the sub-prime mortgage crisis which came to be mainly due to laxity in the lending standards in this market. Home owners who would not under normal circumstances be viewed as credit worthy were deemed as worthy and profitable by lenders who sought high yields. In this sense, aggressive lending resulted to declined standards in lending which resulted to a sharp increase in non prime loans with consumers taking adjustable rate mortgages to fund their consumptions (Verick & Islam, 2010). This uncontrolled access to credit is deemed as one of the reasons for the sub prime crisis.

In essence therefore, a more controlled access to credit by individuals and firms ...

Solution Summary

The long term survival of the United States economy at risk because if the United States government's level of debt is determined.

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