Which of the following resulted from Fed policy that first kept short-term interest rates extremely low during 2002-2004, and then pushed them up substantially during 2005-2006?
a. a reduction in housing prices because variable rate mortgages were unattractive throughout this period
b. upward pressure on housing prices when the interest rates were low, but downward pressure on the price of housing as the interest rates rose
c. lower default rates on adjustable rate mortgages as the interest rates peaked during 2006
d. downward pressure on housing prices when the interest rates were low, but upward pressure on the price of housing as the interest rates rose
B
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Which of the following statements describes the long-run effects of global outsourcing?
A) Wages for U.S. workers will decrease but wages in other countries will increase. B) Wages in all countries will remain the same as before the outsourcing. C) Wages and employment will increase globally. D) Wages will increase globally and employment will stay the same.
Household investment choices need to be balanced between the expected return and the degree of risk involved. There is also the question of liquidity, which means how quickly you can convert the asset back into cash. Which of the following represents an investment with medium return, high risk, and low liquidity?
a. Precious metals b. House c. Mutual funds d. Savings account
Assume that the expectation of a recession next year causes business investments and household consumption to fall, as well as the financing to support it. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and current international transactions in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls and current international transactions become more positive (or less negative). b. The real risk-free interest rate rises and current international transactions become more negative (or less positive). c. The real risk-free interest rate and current international transactions remain the same. d. The real risk-free interest rate rises and current international transactions remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.
If mayonnaise and Miracle Whip are substitutes, then which of the following would increase the demand for Miracle Whip?
a. a decrease in the price of Miracle Whip
b. an increase in the price of mayonnaise
c. a decrease in the price of mayonnaise
d. Both a and b are correct