The term sub-prime crisis is associated with which of the following economic events?

Introduction / Context:
The term sub-prime crisis is widely used to describe the financial turmoil that began in the United States housing market and spread globally in the late 2000s. It involved risky home loans given to borrowers with weak credit profiles and the complex financial instruments built on those loans. This question tests whether the learner can correctly associate the sub-prime crisis with the broader economic event of recession and financial market collapse rather than with unrelated political or social developments.

Given Data / Assumptions:

• The term sub-prime crisis is given without date or country, but the context is international financial news.
• Options refer to economic recession, political instability, structural adjustment and social inequality.
• We assume basic awareness of the global financial crisis that began around 2007 and 2008.

Concept / Approach:
Sub-prime loans are loans given to borrowers who do not meet prime credit standards. When many such loans were made in the housing market and packaged into complex securities, defaults led to severe losses for financial institutions. This triggered a broader financial crisis and economic recession. Therefore, the sub-prime crisis is closely associated with a financial market collapse and global economic slowdown, not with generic political or social issues mentioned in the other options.

Step-by-Step Solution:
Step 1: Understand that sub-prime refers to loans given to borrowers with lower creditworthiness, often at higher interest rates and under lax standards. Step 2: In the United States, a large volume of sub-prime housing loans were issued. When interest rates rose and housing prices stopped increasing, many borrowers defaulted. Step 3: These loans had been bundled into mortgage backed securities and sold across the financial system. Losses on these securities undermined banks and investment firms. Step 4: The resulting collapse of major financial institutions and tightening of credit contributed to a severe economic recession. Step 5: Option A correctly links the sub-prime crisis to an economic recession caused by risky housing loans and financial market collapse. Step 6: Options B, C and D describe different phenomena political instability, structural adjustment and social inequality that are important issues but not what the term sub-prime crisis specifically denotes. Step 7: Therefore option A is the correct answer.

Verification / Alternative check:
Learners can recall that news at the time spoke of the global financial crisis or the Great Recession originating from the United States sub-prime mortgage market. Commentators linked this to failures of financial regulation, complex derivatives and housing market bubbles. No standard explanation connects the term sub-prime crisis with coalition politics, structural adjustment programmes of the 1980s or general social inequality, even though those are important topics in economics and politics. This confirms that the association in option A is the correct one.

Why Other Options Are Wrong:

• Political instability in coalition governments may lead to economic uncertainty, but it is not referred to as the sub-prime crisis.
• Structural adjustment programmes were policy packages in earlier decades and are not the event described by the sub-prime crisis label.
• Growing social inequality is a serious issue but is not the specific phenomenon to which the term sub-prime crisis is applied.

Common Pitfalls:
Some candidates may treat sub-prime as simply another way of saying underdeveloped or disadvantaged and therefore link it to social inequality. Others may think that any major crisis could fit the term. The key is to remember that sub-prime is a technical term from banking referring to a category of risky loans, and that the sub-prime crisis refers specifically to the financial turmoil triggered by those loans. Keeping this technical meaning in mind prevents misinterpretation.

Final Answer:
Economic recession caused by risky housing loans and financial market collapse