Mortgage lenders often resell mortgages in secondary markets. How might this make lenders act differently than if they intended to hold the mortgages themselves?
What will be an ideal response?
Lenders would be more likely to grant mortgages if they intended to resell the mortgages than if they intended to hold them. Reselling reduces the risk of granting mortgages because lenders no longer need to worry that borrowers will default on their mortgage loans.
You might also like to view...
Which of the following would result in an increase in the demand for Toyota automobiles?
A. An increase in the price of Toyota automobiles B. A decrease in the price of Toyota automobiles C. A decrease in the price of Honda automobiles D. An increase in the price of Honda automobiles
When marginal benefit exceeds marginal cost in a market,
A) only consumer surplus is reduced. B) only producer surplus is reduced. C) consumer surplus and producer surplus are not affected compared to when production is such that marginal cost equals marginal benefit. D) the deadweight loss is negative. E) None of the above answers is correct.
Which of the following strategies are adopted by a business tycoon when the first new management of the purchased company fails?
a. He tries a second management team. b. He tries to train and motivate the existing management team. c. He sells off part of the company in the market. d. He tries to reduce the cost of production by lowering output.
When a price floor is above the equilibrium price,
a. quantity demanded will exceed quantity supplied, so there will be a shortage. b. quantity supplied will exceed quantity demanded, so there will be a surplus. c. the market will be in equilibrium. d. This is a trick question because price floors are generally set below the equilibrium price.