Final answer:
Economic events such as the technology boom and the Great Recession significantly influenced the demand for financial capital, impacting company performance and financing structures, thus affecting the ROE and ROA figures.
Step-by-step explanation:
The question inquiries about the reasons behind the narrowing difference between Return on Equity (ROE) and Return on Assets (ROA) during the 2000s. Economic events significantly impacted business confidence and the availability of financial capital, affecting these ratios. During the technology boom of the late 1990s, businesses were highly optimistic about the potential returns from technology investments, increasing their demand for financial capital, causing a rightward shift in demand at any given interest rate. However, the Great Recession of 2008 and 2009 led to a shift in demand for financial capital to the left, as businesses became more conservative in a climate of economic uncertainty.
The economic expansion since the 1980s has also led to substantial growth, but the benefits have unevenly distributed, with little to average Americans. This has exacerbated the feeling of relative poverty among the population, contributing to a range of socio-economic issues. These economic and social changes, among others, have influenced ROE and ROA by affecting companies’ performance and financing structures. For instance, increased debt levels due to more accessible financial capital can inflate ROE while not affecting ROA as much, which could have contributed to the narrowing of the differences between the two ratios.