Regulatory policies requiring lenders to extend more low down-payment loans to higher-risk borrowers along with the Fed's low short-term interest rate policy during 2002-2004 caused
a. housing prices to fall during that period.
b. a reduction in the use of adjustable rate mortgages to finance the purchase of housing.
c. a reduction in housing construction during 2002-2005.
d. mal-investment, that is, excessive investment in housing construction during 2002-2005.
D
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In the long run, total spending only influences:
A. potential output. B. actual output. C. productive capacity. D. inflation.
An increase in expected inflation causes the real interest rate to ________ and output to ________ in the short run, before prices adjust to restore equilibrium
A) rise; rise B) rise; fall C) fall; rise D) fall; fall
The MPC on ________ income is less than the MPC on ________ income according to ________ theory
A) transitory; permanent; Friedman's B) transitory; permanent; Modigliani's C) permanent; transitory; Modigliani's D) permanent; transitory; Friedman's
Two projects have the following NPVs and standard deviations:
Project A Project B NPV 200 300 Standard deviation 75 100 Which of the two projects is more risky?