Based on the graph showing how the subprime share of home mortgages grew rapidly before the big decline, what can be determined by looking at the two years before and the two years after the period when subprime mortgages’ share of the market reached its peak?
a. The share of subprime mortgages remained near the peak the entire period.
b. The share of subprime mortgages fell at the same pace that it rose.
c. The share of subprime mortgages rose faster than it fell.
d. The share of subprime mortgages fell faster than it rose.
d. The share of subprime mortgages fell faster than it rose.
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In the simple Keynesian cross model with no government or foreign sectors, the value of the multiplier is defined as
A) 1/(MPC - 1). B) 1/(1 - MPC). C) 1/(MPC + 1). D) 1/MPC.
When the production of a good has a marginal external cost, which of the following occurs in an unregulated market?
i. Overproduction relative to the efficient level will occur. ii. The market price is less than the marginal social cost at the equilibrium quantity. iii. A deadweight loss occurs. A) i only B) ii only C) iii only D) i and ii E) i, ii, and iii
Which of the following is not a reason for studying credit market frictions?
A) explaining features of financial crises. B) explaining key elements of financial market behavior. C) understanding why Ricardian equivalence may not work. D) explaining why collateral does not matter.
Which of the following is an example of contractionary fiscal policy?
A. Cutting spending B. Reducing taxes C. Increasing spending D. None of these