14. Some economists stress the role of monetary policy in the period leading up to the 2007–2009 recession.

Between 2001 and 2003, the Federal Reserve lowered the target federal funds rate from 6.5 percent to 1 percent and kept it there through much of 2004. This resulted in a substantial decline in real interest rates throughout the economy, including mortgage rates. Based on the chapter’s discussion of monetary and financial factors, explain how the Federal Reserve’s policies could have contributed to the economic “bubble” of the prerecession years of 2000–2006.