Which of the following statements is true about the high rate of mortgage defaults that contributed to the financial crisis of 2007 and 2008?
A. High interest rates on mortgage loans were the primary cause of defaults.
B. The high rate of defaults occurred despite the efforts of government to discourage new
home ownership and slow the growth of the housing bubble.
C. Prior to the rise in defaults, banks had become lax in their lending practices, resulting in a
large number of bad loans.
D. The high rate of defaults resulted primarily from the two years of recession preceding the
mortgage default crisis.
C. Prior to the rise in defaults, banks had become lax in their lending practices, resulting in a
large number of bad loans.
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If price increases and the quantity purchased increases, we know that
A) supply increased. B) supply decreased. C) demand increased. D) demand decreased.
Deflation occurs only when
A. all prices for all goods fall. B. some prices fall, but average prices still rise. C. the average price level increases but at a slower rate than before. D. the average price level (CPI) falls.
The "real" price of a good is known as
A. relative price of the good. B. the dollar price of the good since we use dollars in the United States. C. the absolute price of the good. D. the price actually paid for a good instead of the sticker price.
Which of the following is the outcome of the lemons problem in the used-car market?
A) Only low-quality cars will be traded in the market. B) Only high-quality cars will be traded in the market. C) Both low-quality and high-quality cars will be traded in the market. D) No cars will be traded in the market.