Which of the following contributed to the dramatic rise in housing prices between 2002 and mid-year 2006?
a. government policy made credit for housing abundant and easily available
b. the Fed's restrictive monetary policy, which led to high interest rates
c. the tightening of loan standards by commercial lenders
d. the large amounts of reserves and equity capital being held by financial institutions in order to back new mortgages
A
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A stock market crash which causes stock prices to fall should cause
A) an increase in wealth. B) an increase in consumption spending. C) no change in consumption spending. D) a decrease in consumption spending.
The formula for determining changes in demand deposits is the reciprocal of the required reserve ratio (i.e., 1/RRR) multiplied by the change in reserves
a. True b. False
Which of the following is a reason to think that government action may not be valuable to improve market outcomes with asymmetric information?
a. The private market can sometimes deal with information asymmetries using signaling and screening. b. The government rarely has more information than the private parties. c. Government actions have their own imperfections. d. All of the above are correct.
Exhibit 2-3 Production possibilities curve data A B C D E Capital goods 0 1 2 3 4 Consumer goods20 18 14 8 0 According to the data given in Exhibit 2-3, the production of 1 unit of capital goods and 20 units of consumer goods:
A. is possible but would be inefficient. B. may be a result of unemployment. C. may be a result of unused natural resources. D. is not feasible with current resources and technology.