Barry was a mortgage originator from 2002 to 2007. He often had clients who had limited financial assets, but he nevertheless encouraged them to take out large mortgages he felt they probably could not afford. Briefly explain why Barry would have been motivated to make such financial transactions.
What will be an ideal response?
Student answers will vary. A sample response follows. Barry would not have been very concerned about the risk of making loans to people who could not afford them because he would have known he could pass that risk on to others. Fannie Mae and Freddie Mac were aggressively purchasing loans of this type, as were other financial institutions. Since Barry would receive origination fees when a mortgage was signed and then sell the loan right away, he could profit by issuing the mortgage without worrying about the risk that it would not be repaid.
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The data in the table above give two points on the demand curve for pizza. Using the midpoint method, when the price of a pizza falls from $10 to $9, what is the percentage change in the quantity demanded?
A) 22.2 percent B) 10.0 percent C) 15.5 percent D) 5.2 percent E) 25 percent
Which of the following leads to a deadweight loss? i. competition ii. taxes iii. consumer surplus iv. monopoly
A) ii only B) iii and iv C) i and ii D) ii and iv E) i, ii, and iii
The value of labor is in skill, effort and knowledge
Indicate whether the statement is true or false