Question: Question 2 [30 marks] This question refers to the nancial crisis that exploded in October 2008. The US banking crisis 2007-2008 was a nancial cyclone

Question 2 [30 marks] This question refers to the nancial crisis

Question 2 [30 marks] This question refers to the nancial crisis that exploded in October 2008. The US banking crisis 2007-2008 was a nancial cyclone with eye in collateral debt obligations and a subset of US financial institutions. In October 2008, there was a bank run in the US, a drastic reduction of the money supply and the credit market was frozen. Answer the following questions with precision: (a) What caused the sudden stop of credit markets in October 2008? [15 marks]; and (b) What was the reason for the reduction in the money supply [15 m

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