A sub-prime loan is a loan extended to borrowers
a. at a subsidized interest rate below the prime rate normally offered to the most creditworthy borrowers.
b. with blemished credit or limited documentation of their income, employment history, and other indicators of credit worthiness.
c. seeking a 30-year, fixed rate mortgage.
d. who have a FICO score above 660.
B
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Explain why bond prices and interest rates are inversely related
Protectionism is the view that free trade is ________ and should be ________.
A. inevitable; allowed B. harmful; restricted C. illegal; forbidden D. helpful; encouraged
When the Fed sells bonds in the open market, in the product market (the aggregate demand- aggregate supply model),
A) real GDP will fall and the price level will rise. B) real GDP and the price level will rise. C) real GDP and the price level will fall. D) real GDP will rise and the price level will fall.
All of the following are sources of the impact lag except
A) it takes some time for the deposit multiplier process to work itself out. B) firms need some time to respond to the monetary policy with respect to their investment plans. C) it takes time for the Fed to formulate a policy that best addresses a problem in the economy. D) a monetary change is likely to affect the exchange rate, but that translates into a change in net exports only after some delay.