Recall the Application. Securitization refers to
A) the practice of purchasing loans, repackaging them, and selling them to the financial markets.
B) the federal insurance received by home buyers to protect them from declining home values.
C) the process used by the Federal Reserve to insure home builders against bank failures.
D) the stocks and bonds used as collateral when one financial institution sells mortgages to another financial institution.
A
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Explain two reasons why the Fed does not have complete control over the level of bank deposits and loans. Explain how a change in either factor affects the deposit expansion process
What will be an ideal response?
The above figure shows the market for anti-freeze. The government imposes the sales tax shown in the figure on sellers. What is the deadweight loss from this tax?
A) $1,500 B) $3,000 C) $4,500 D) $6,000
Some proponents of trade sanctions argue for changes in policy because they fear low standards will be used to capture markets and foreign investment
While theoretically possible, there is little or no support for the view that countries use low labor standards this way, because A) countries with low labor standards generally have trouble attracting foreign investment. B) low standards can reduce costs, but they cannot change a country's comparative advantage. C) it is impossible to lower labor standards. D) Both A and B are correct. E) A, B, and C are all correct.
Why was the Fed reluctant to rescue insolvent banks?
A) It thought it may lead to moral hazard. B) It thought it may lead to adverse selection. C) It thought they were still liquid. D) It did not think they were insolvent.