Agency problems in the subprime mortgage market included all of the following EXCEPT
A) homeowners could refinance their houses with larger loans when their homes appreciated in value.
B) mortgage originators had little incentives to make sure that the mortgagee is a good credit risk.
C) underwriters of mortgage-backed securities had weak incentives to make sure that the holders of the securities would be paid back.
D) the evaluators of securities, the credit rating agencies, were subject to conflicts of interest.
A
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If the actual money multiplier equals the potential money multiplier and if the Federal Reserve wishes to increase the money supply by $500 when the reserve ratio is 10 percent, it should
A) buy $5000 of government bonds. B) sell $5000 of government bonds. C) sell $50 of government bonds. D) buy $50 of government bonds.
In markets with asymmetric information
A) asymmetric information causes moral hazard and then it causes adverse selection. B) moral hazard causes adverse selection which in turn causes asymmetric information. C) asymmetric information causes adverse selection and then it causes moral hazard. D) adverse selection causes moral hazard which in turn causes asymmetric information.
A Cobb-Douglas production function:
A) exhibits constant returns to scale. B) exhibits increasing returns to scale. C) exhibits decreasing returns to scale. D) can exhibit constant, increasing, or decreasing returns to scale.
Which of the following would not be a central issue in economics?
a. Who produces the goods? b. How is production carried out? c. Who consumes what? d. What goods are produced? e. When are goods consumed and produced?