the economics of money, banking, and financial markets

256 $

© 2014 Pearson Canada Inc.$

47. 
    

    Credit default swaps ____.
    A) provide payments to holders of bonds if they default
    B) decrease asymmetric information in the mortgage markets
    C) had strong incentives to make sure CDO holders would be paid off
    D) were only a small part of insurance companies portfolios
    Answer: A
    Diff: 2 Type: MC Page Ref: 190
    Skill: Recall
    Objective List: 9.2 Explain how increases in adverse selection and moral hazard cause financial
    crises

    
    


48. 
    

    The housing boom in the United States was aided by ____.
    A) liquidity from China and India
    B) higher interest rates
    C) tariffs reducing global trade
    D) weak balance sheets in the banking industry
    Answer: A
    Diff: 2 Type: MC Page Ref: 191
    Skill: Recall
    Objective List: 9.2 Explain how increases in adverse selection and moral hazard cause financial
    crises

    
    


49. 
    

    The "democratization of credit" was attributed to ____.
    A) the subprime mortgage market
    B) the 2000-2001 recession
    C) growth of prime mortgages
    D) asset-price gaps
    Answer: A
    Diff: 1 Type: MC Page Ref: 191
    Skill: Recall
    Objective List: 9.2 Explain how increases in adverse selection and moral hazard cause financial
    crises

    
    


50. 
    

    Credit market problems of adverse selection and moral hazard increased as a result of all of
    the following except ____.
    A) increase in housing market prices
    B) increased uncertainty from the failures of financial institutions
    C) deterioration in financial institutions' balance sheets
    D) decline in the stock market of over 40 percent from its peak
    Answer: A
    Diff: 2 Type: MC Page Ref: 191
    Skill: Applied
    Objective List: 9.3 Discuss the most recent financial crisis