As short-term interest rates began to rise in 2005, which one of the following mortgage loan categories experienced the largest increase in default and foreclosure rates?
a. fixed rate mortgages to prime borrowers
b. fixed rate mortgages to sub-prime borrowers
c. adjustable rate mortgages extended to both prime and sub-prime borrowers
d. adjustable rate mortgages to sub-prime borrowers only; the default and foreclosure rates of these loans extended to prime borrowers declined
C
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In the United States, health care spending on people ________ is six times greater than on people ________
A) under age 3; over age 65 B) over age 65; aged 18 to 24 C) aged 18 to 24; 25 to 44 D) over age 65; aged 25 to 44
An open market purchase of government securities by the Fed will tend to result in which of the following, other things being equal?
a. increased bond prices b. an increase in real output c. decreased interest rates d. all of the above
The "investment" component of aggregate demand will include all of the following except
a. expenditures of business firms on new plants. b. expenditures of business firms on new equipment. c. resales of existing physical assets. d. household spending on new homes.
What is “crowding out”? Why is it important in discussions of fiscal policy? Use an appropriate diagram to illustrate your answer.
What will be an ideal response?