What was principal cause of the 2007 recession?

Subprime mortgages was the principal cause of the 2007 recession.

Hedge funds, banks, and insurance companies led to the subprime mortgage crisis. Hedge funds and banks created mortgage-backed securities. The insurance companies covered them with credit default swaps. Demand for mortgages caused an asset bubble in housing.  

Home prices plummeted, and borrowers defaulted resulting in the 2007 banking crisis, the 2008 financial crisis, and the Great Recession.

the correct answer is:

b) a rich merchant.

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