Homework Answers
CORRECT ANSWER IS OPTION A
EXPLANATION
A. IN DECEMBER 2001 FEDRAL FUND RATE WAS REDUCE TO 1.75% WHICH LED TO HUGE DEMAND OF HOME LOAN LATER RISE FFR CAUSE FINANCIAL CRISIS 2007
B. HIGH PAYMENT WOULD NOT LET DEMAND FOR LOAN TO RISE
C. HOME LOAN ARE LONG TERM LOANS
D. HIGH INITIAL PAYMENT WOULD NOT LET THE DEMAND OF LOANS TO RISE
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12) 12) One contributing factor to the 2007-2009 financial crisis was the structuring of mortgage loans...
The financial crisis of 2007–2009 was the most severe one since the Great Depression of the...
The financial crisis of 2007–2009 was the most severe one since the Great Depression of the 1930s. What were the main causes of the 2007–2009 financial crisis other than the housing market collapse? What were its impacts on the U.S. financial institutions and markets? If you were an economic policy decision maker, what could you have done better to resolve the financial crisis during that period?
1. The key factor(s) in the 2008 financial crisis / housing bubble was Select one: a....
1. The key factor(s) in the 2008 financial crisis / housing bubble was Select one: a. Corporate greed b. Lack of regulation of the financial and housing sectors c. Low interest rates and federal intervention in the housing market d. High interest rates 2. According to the video Money for Nothing, which of the following was proposed regarding the post-2008 economic recovery? Select one: a. We may be passing through the "eye of the storm" b. The crisis is over...
4. The subprime mortgage market The financial crisis started with defaults-borrowers not repaying their loans-on subprime mortgages in the United States. Subprime mortgages have which of the followin...
4. The subprime mortgage market The financial crisis started with defaults-borrowers not repaying their loans-on subprime mortgages in the United States. Subprime mortgages have which of the following characteristics? Check all that apply. They have lower overall interest rates than most other mortgages. They are made to people with relatively few assets. They have a higher likelihood of default. Subprime mortgages expanded to about 35% of all mortgages issued in the United States in 2004. which of the following contributed...
Problem 6 Due to the collapse of the housing bubble in 2007-2008 there was a financial...
Problem 6 Due to the collapse of the housing bubble in 2007-2008 there was a financial crisis that led to rampant unemployment. Draw a best resonse curve (BRC) for each of the following years and explain what it illustrates 1. the pre-crisis period (2006) 2. the crisis years (20078) 3. the post-crisis year (2009) Your diagram should show that firms would be able to lower costs during the crisis by offer ing a lower wage however, there is empirical evidence...
Prior to the Financial Crisis, rating agencies mistakenly rated Mortgage Backed Securities (MBS) too high because:...
Prior to the Financial Crisis, rating agencies mistakenly rated Mortgage Backed Securities (MBS) too high because: Historically, mortgages have very low default rates. The payments on the MBS’s were “insured” by credit default swaps. The agencies didn’t account for the increase in sub-prime mortgages. All of the above. Why should credit analysts be concerned if a company’s stock trades below book value? It means the company is probably going bankrupt It means the company will probably incur lots of debt...
6) Financial crises in advanced economies might start from a A) debt deflation. B) currency crisis....
6) Financial crises in advanced economies might start from a A) debt deflation. B) currency crisis. C) mismanagement of financial innovations. D) currency mismatch. 7) The most common definition that monetary policymakers use for price stability is A) low and stable deflation. B) an inflation rate of zero percent. C) high and stable inflation. D) low and stable inflation. 8) Monetary policy is considered time-inconsistent because A) of the lag times associated with the implementation of monetary policy and its...
00000000 LELOGUCCO in the short run unemployment and output are pretty tightly linked According Okun's Lew...
00000000 LELOGUCCO in the short run unemployment and output are pretty tightly linked According Okun's Lew a) One extra point of unemployment costs two percent of GOT b) Two extra points of unemployment costs three percent of GDP c) Three extra point of unemployment costs mine percent of OOP d) Five extra points of unemployment costs five percent of GDP The shadow banking System nearly died in 2002 Then the system was 20-years old it had grown because of a...
Alan recently joined Friendly Investment and Financing Options (FIFO) as a loan officer. FIFO is a...
Alan recently joined Friendly Investment and Financing Options (FIFO) as a loan officer. FIFO is a national company that specializes in mortgage lending. One of Alan’s responsibilities is to increase the amount of mortgages FIFO initiates. In a meeting he had with the CEO yesterday, Alan was told about a new mortgage that FIFO intends to market. The new mortgage is called an option adjustable rate mortgage, or an option ARM for short, and its most attractive feature is that...
Which of the following statements is true A Interest rates on bonds of different maturities tend...
Which of the following statements is true A Interest rates on bonds of different maturities tend to move together over time O B. Yield curves almost always slope downward. O c. when short-term interest rates are low. yield curves tend to be inverted. D. When short-term interest rates are high, yield curves tend to be upward sloping According to the segmented markets theory of the term structure of interest rates, if bondholders prefer short-term bonds to long-term bonds, the yield...
9. Applying the extended AD-AS model Financial crises, such as the one that impacted many developed...
9. Applying the extended AD-AS model
Financial crises, such as the one that impacted many developed
countries starting in 2007, decrease banks’ ability and willingness
to make loans. Decreased availability of credit decreases
businesses’ ability to make investment purchases and consumers’
ability to buy goods and services. As a result, a financial crisis
is a negative shock for an economy.
The following graph shows an economy’s aggregate demand curve
and its short-run and long-run aggregate supply curves after a
financial...
4. The subprime mortgage market The financial crisis started with defaults-borrowers not repaying their loans-on subprime mortgages in the United States. Subprime mortgages have which of the following characteristics? Check all that apply. They have lower overall interest rates than most other mortgages. They are made to people with relatively few assets. They have a higher likelihood of default. Subprime mortgages expanded to about 35% of all mortgages issued in the United States in 2004. which of the following contributed...
Problem 6 Due to the collapse of the housing bubble in 2007-2008 there was a financial crisis that led to rampant unemployment. Draw a best resonse curve (BRC) for each of the following years and explain what it illustrates 1. the pre-crisis period (2006) 2. the crisis years (20078) 3. the post-crisis year (2009) Your diagram should show that firms would be able to lower costs during the crisis by offer ing a lower wage however, there is empirical evidence...
6) Financial crises in advanced economies might start from a A) debt deflation. B) currency crisis. C) mismanagement of financial innovations. D) currency mismatch. 7) The most common definition that monetary policymakers use for price stability is A) low and stable deflation. B) an inflation rate of zero percent. C) high and stable inflation. D) low and stable inflation. 8) Monetary policy is considered time-inconsistent because A) of the lag times associated with the implementation of monetary policy and its...
00000000 LELOGUCCO in the short run unemployment and output are pretty tightly linked According Okun's Lew a) One extra point of unemployment costs two percent of GOT b) Two extra points of unemployment costs three percent of GDP c) Three extra point of unemployment costs mine percent of OOP d) Five extra points of unemployment costs five percent of GDP The shadow banking System nearly died in 2002 Then the system was 20-years old it had grown because of a...
Which of the following statements is true A Interest rates on bonds of different maturities tend to move together over time O B. Yield curves almost always slope downward. O c. when short-term interest rates are low. yield curves tend to be inverted. D. When short-term interest rates are high, yield curves tend to be upward sloping According to the segmented markets theory of the term structure of interest rates, if bondholders prefer short-term bonds to long-term bonds, the yield...
9. Applying the extended AD-AS model
Financial crises, such as the one that impacted many developed
countries starting in 2007, decrease banks’ ability and willingness
to make loans. Decreased availability of credit decreases
businesses’ ability to make investment purchases and consumers’
ability to buy goods and services. As a result, a financial crisis
is a negative shock for an economy.
The following graph shows an economy’s aggregate demand curve
and its short-run and long-run aggregate supply curves after a
financial...
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