the economics of money, banking, and financial markets

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55. 
    

    Increased complexity of structured products can ____.
    A) destroy information and improve adverse selection problems
    B) increase information and worsen adverse selection problems
    C) make asymmetric information better in the financial system
    D) make asymmetric information worse in the financial system
    Answer: D
    Diff: 2 Type: MC Page Ref: 190
    Skill: Recall
    Objective List: 9.3 Discuss the most recent financial crisis

    
    


56. 
    

    As housing prices rose, many subprime borrowers were able to ____.
    A) default on their mortgage
    B) reduce their loan-to-value ratio
    C) get piggyback mortgages
    D) walk away from their houses
    Answer: C
    Diff: 2 Type: MC Page Ref: 191
    Skill: Applied
    Objective List: 9.3 Discuss the most recent financial crisis

    
    


57. 
    

    When housing prices began to decline after their peak in 2006, many subprime borrowers
    found that their mortgages were "underwater." This meant that ____.
    A) the value of the house fell below the amount of the mortgage
    B) the basement flooded since they could not afford to fix the leaky plumbing
    C) the roof leaked during a rainstorm
    D) the amount that they owed on their mortgage was less than the value of their house
    Answer: A
    Diff: 2 Type: MC Page Ref: 191
    Skill: Applied
    Objective List: 9.3 Discuss the most recent financial crisis

    
    


58. 
    

    Between October 2007 and March 2009, asset prices fell by ____.
    A) over 50 percent
    B) 10 percent
    C) around 16 percent
    D) less than 30 percent
    Answer: A
    Diff: 1 Type: MC Page Ref: 192
    Skill: Recall
    Objective List: 9.3 Discuss the most recent financial crisis