One reason the housing bubble occurred is because:
A. the recency effect caused homes to typically be undervalued.
B. securitization removed much of the risk from the sellers of subprime mortgages.
C. the herd instinct caused everyone to believe home prices would continue to fall.
D. All of these statements are true.
Answer: B
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If a Pigovian tax is levied on consumers, the demand curve will shift:
A. straight up, decreasing quantity. B. straight down, decreasing quantity. C. straight down, increasing quantity. D. straight up, increasing quantity.
Calculate GDP for a country with investment of $2 trillion, government purchases of $3 trillion, capital depreciation of $1.5 trillion, consumption of $10 trillion, exports of $3.4 trillion, and imports of $3.9 trillion
Suppose there is a reduction in cash flow. This suggests that
A) firms have decreased their expectations of future profits. B) the real interest rate has increased. C) the rate of depreciation has increased. D) current profits have decreased. E) all of the above
An examination of the quintile distribution of before-tax household income data for 1970 and 2008 given in the table above suggests a trend of:
A. A greater equality in the distribution of income over the period
B. A greater inequality in the distribution of income over the period
C. Rising income levels for the upper-income groups
D. Falling income levels for the lower-income groups