Briefly explain why the decline in housing prices led to a major financial crisis
What will be an ideal response?
Many of the mortgage loans that had been given out during earlier expansion were of poor quality. Many of the borrowers had taken too large a loan and were increasingly unable to make mortgage payments. mortgage backed securities were so complex that their value was nearly impossible to assess. Not knowing the quality of the assets that other banks had on their balance sheet, banks became very reluctant to lend to each other for fear that the bank to which they lent might not be able to repay. The credit market froze up. Unable to borrow, and with assets if uncertain value, many banks found them in trouble. The bankruptcy of Lehman Brothers put other banks at risk of going bankrupt as well. The whole financial system was in trouble.
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Advocates of the public-choice view argue that voting behavior is influenced by the
a. rate of inflation prior to an election. b. level of economic activity. c. "favorite son" syndrome. d. campaign issues.
A new government study reveals that daily consumption of peanut butter increases life expectancy by 10 years. What will this do to the input markets for peanuts and peanut butter factory workers? Assuming bologna is a substitute for peanut butter, what will happen in the market for bologna factory workers?
If the number of suppliers in the microcomputer industry increases, what would we expect to happen?
A. The price of microcomputers will rise. B. Movement along the demand curve will occur. C. The number of microcomputers sold will fall. D. The supply curve will shift left.
_________ believe that people make well-reasoned and self-interested decisions based upon available information.
Fill in the blank(s) with the appropriate word(s).