The first element of a financial crisis is
a. inflation.
b. a decline in confidence in financial institutions.
c. a relaxation of rules and regulations that pertain to the financial system.
d. a large decline in some asset prices.
d
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Describe how a demand-pull inflation can occur
What will be an ideal response?
Which of the following factors are least likely to affect what countries end up trading in the international market?
a. International trade tariffs b. Government debt levels c. Comparative advantages d. Differences in tastes e. Different technological needs
The increase of sub-prime (including Alt-A) loans as a share of the total from 2001-2005 was an important contributing factor to the economic crisis of 2008 because
a. these loans initially reduced the demand for housing. b. these loans initially reduced housing prices. c. the default and foreclosure rates on these loans are several times higher than conventional loans to prime borrowers. d. the default and foreclosure rates on these loans are considerably lower than conventional loans to prime borrowers.
If a homeowner sells a kitchen table and chairs that she no longer wants to use and does not report the income earned from the sale to the Internal Revenue Service, the value of GDP is
A. understated because this transaction took place in the underground economy. B. overstated because the sale of the furniture is counted twice in GDP calculations. C. unaffected by this transaction because the table and chairs were already counted in GDP as final goods when the homeowner bought them new. D. understated because this purchase was a nonmarket transaction.