Question 1

The "negative-amortization" mortgage typically converts later to a

Accepted Answer

A) traditional mortgage with a higher payment. 
B) traditional mortgage with a lower payment. 
C) new "negative-amortization" mortgage with an even lower payment. 
D) "exotic" mortgage with a lower payment. 
A) traditional mortgage with a higher payment. 
B) traditional mortgage with a lower payment. 
C) new "negative-amortization" mortgage with an even lower payment. 
D) "exotic" mortgage with a lower payment. A

Question 2

The least affordable places to live tended to be located disproportionately in the

Accepted Answer

A) upper Mid-West. 
B) mid-Atlantic states and along the West Coast. 
C) Great Plains states. 
D) southeastern states. 
A) upper Mid-West. 
B) mid-Atlantic states and along the West Coast. 
C) Great Plains states. 
D) southeastern states. B

Question 3

Many years ago, the traditional mortgage loan structure specified

Accepted Answer

A) a down payment of 20%. 
B) an initial loan-to-value ratio of 100%. 
C) a variable interest rate. 
D) all of the options are correct. 
A) a down payment of 20%. 
B) an initial loan-to-value ratio of 100%. 
C) a variable interest rate. 
D) all of the options are correct. A

Question 4

A mortgage loan that would allow a borrower to pay less than the full interest accrued on the debt over the first few (typically five or ten)years of the mortgage could be called

Accepted Answer

A) an "interest-only" mortgage. 
B) a "zero-interest" mortgage. 
C) a "negative-amortization" mortgage. 
D) all of the options are correct. 
A) an "interest-only" mortgage. 
B) a "zero-interest" mortgage. 
C) a "negative-amortization" mortgage. 
D) all of the options are correct.

Question 5

If the typical home in Des Moines were located in San Francisco, it would probably

Accepted Answer

A) command a higher market price. 
B) command a lower market price. 
C) command the same price, since it is still just a typical house. 
D) be at lower risk for earthquake damage. 
A) command a higher market price. 
B) command a lower market price. 
C) command the same price, since it is still just a typical house. 
D) be at lower risk for earthquake damage.

Question 6

In comparing the traditional way of structuring mortgages and the newer structure of providing mortgages that securitized them and insured those securities with credit default swaps , it is clear that the ____ structure allowed more people to afford homes and that the ___ structure was safer to the health of the overall economy.

Accepted Answer

A) traditional; traditional 
B) newer; newer 
C) traditional; newer 
D) newer; traditional 
A) traditional; traditional 
B) newer; newer 
C) traditional; newer 
D) newer; traditional

Question 7

Mortgage amortization is a plan to

Accepted Answer

A) reduce the borrower's original debt over a specified period of time. 
B) reduce the borrower's original equity in the home over a specified period of time. 
C) pay off exactly 80% of the value of the home over a specified period of time. 
D) increase the borrower's marginal income tax rate over a specified period of time. 
A) reduce the borrower's original debt over a specified period of time. 
B) reduce the borrower's original equity in the home over a specified period of time. 
C) pay off exactly 80% of the value of the home over a specified period of time. 
D) increase the borrower's marginal income tax rate over a specified period of time.

Question 8

A "bubble" in the housing market can be more easily fueled by

Accepted Answer

A) traditional mortgage loans. 
B) cash-only financing requirements. 
C) exclusive reliance upon banks as a source of credit. 
D) "exotic" mortgages. 
A) traditional mortgage loans. 
B) cash-only financing requirements. 
C) exclusive reliance upon banks as a source of credit. 
D) "exotic" mortgages.

Question 9

Asset price "bubbles" are more likely to occur when interest rates are relatively low.

Accepted Answer

A) True 
 B)False

Question 10

Among the most important supply side factors explaining homes prices would be the

Accepted Answer

A) size of the metropolitan area. 
B) size of the homebuyer's car. 
C) cost of land 
D) size of the metropolitan area and the cost of land. 
A) size of the metropolitan area. 
B) size of the homebuyer's car. 
C) cost of land 
D) size of the metropolitan area and the cost of land.

Question 11

Asset price "bubbles" occur when buyers expect asset prices to increase in the future.

Accepted Answer

A) True 
 B)False

Question 12

If homeowners purchased a $250,000 home with a zero-down, interest-only mortgage, and the value of the home subsequently fell to $200,000, in order to sell the house and move to another city, the homeowners would be required at closing to pay (in addition to the proceeds from the home sale)

Accepted Answer

A) nothing. 
B) $50,000. 
C) any transaction costs and real estate fees. 
D) $50,000 plus any transaction costs and real estate fees. 
A) nothing. 
B) $50,000. 
C) any transaction costs and real estate fees. 
D) $50,000 plus any transaction costs and real estate fees.

Question 13

Among the most important demand side factors explaining homes prices would be the

Accepted Answer

A) growing shortage of real estate agents. 
B) relative price of hybrid vehicles. 
C) level of mortgage interest rates. 
D) adoption of CAFTA. 
A) growing shortage of real estate agents. 
B) relative price of hybrid vehicles. 
C) level of mortgage interest rates. 
D) adoption of CAFTA.

Question 14

If homeowners purchased a $250,000 home with a zero-down, interest-only mortgage, and the value of the home subsequently fell to $200,000, the homeowners' equity in the home would be approximately

Accepted Answer

A) -$50,000. 
B) zero. 
C) $50,000. 
D) $200,000. 
A) -$50,000. 
B) zero. 
C) $50,000. 
D) $200,000.

Question 15

Asset price "bubbles" are sustained price increases driven by economic fundamentals.

Accepted Answer

A) True 
 B)False

Question 16

Among the most important demand side factors explaining homes prices would be the

Accepted Answer

A) number of homebuilders. 
B) income of potential homebuyers. 
C) average wage paid to carpenters. 
D) cost of lumber. 
A) number of homebuilders. 
B) income of potential homebuyers. 
C) average wage paid to carpenters. 
D) cost of lumber.

Question 17

"Negative-amortization" mortgages are best-suited to borrowers who are nearing retirement and expect their income to decrease in the future.

Accepted Answer

A) True 
 B)False

Question 18

The bursting U.S. housing bubble of 2007 did not trigger an immediate recession because

Accepted Answer

A) the bubble only existed in relatively few locations. 
B) previous homeowners were able to move into apartments. 
C) FEMA provided trailers for use by distressed homeowners. 
D) all of the options are correct. 
A) the bubble only existed in relatively few locations. 
B) previous homeowners were able to move into apartments. 
C) FEMA provided trailers for use by distressed homeowners. 
D) all of the options are correct.

Question 19

"Exotic" mortgages became popular in part because home prices were expected to

Accepted Answer

A) rise quickly. 
B) fall precipitously. 
C) remain virtually constant. 
D) become increasingly unpredictable. 
A) rise quickly. 
B) fall precipitously. 
C) remain virtually constant. 
D) become increasingly unpredictable.

Question 20

Location is a "fundamental" determinant of the price of any house.

Accepted Answer

A) True 
 B)False

Exam 13: The Housing Bubble

The "negative-amortization" mortgage typically converts later to a

The least affordable places to live tended to be located disproportionately in the

Many years ago, the traditional mortgage loan structure specified

A mortgage loan that would allow a borrower to pay less than the full interest accrued on the debt over the first few (typically five or ten)years of the mortgage could be called

If the typical home in Des Moines were located in San Francisco, it would probably

Mortgage amortization is a plan to

A "bubble" in the housing market can be more easily fueled by

Asset price "bubbles" are more likely to occur when interest rates are relatively low.

Among the most important supply side factors explaining homes prices would be the

Asset price "bubbles" occur when buyers expect asset prices to increase in the future.

If homeowners purchased a $250,000 home with a zero-down, interest-only mortgage, and the value of the home subsequently fell to $200,000, in order to sell the house and move to another city, the homeowners would be required at closing to pay (in addition to the proceeds from the home sale)

Among the most important demand side factors explaining homes prices would be the

If homeowners purchased a $250,000 home with a zero-down, interest-only mortgage, and the value of the home subsequently fell to $200,000, the homeowners' equity in the home would be approximately

Asset price "bubbles" are sustained price increases driven by economic fundamentals.

Among the most important demand side factors explaining homes prices would be the

"Negative-amortization" mortgages are best-suited to borrowers who are nearing retirement and expect their income to decrease in the future.

The bursting U.S. housing bubble of 2007 did not trigger an immediate recession because

"Exotic" mortgages became popular in part because home prices were expected to

Location is a "fundamental" determinant of the price of any house.

Economics: the Study of Opportunity Cost

Supply and Demand

The Concept of Elasticity and Consumer and Producer Surplus

Firm Production, Cost, and Revenue

Perfect Competition, Monopoly, and Economic Versus Normal Profit

Every Macroeconomic Word You Ever Heard: Gross Domestic Product, Inflation, Unemployment, Recession, Depression

Interest Rates and Present Value

Aggregate Demand and Aggregate Supply

Fiscal Policy

Monetary Policy

Federal Spending

Federal Deficits, Surpluses, and the National Debt

The Recession of 2007-2009: Causes and Policy Responses

Is Economic Stagnation the New Normal

Is the Fiscalsky Falling: An Examination of Unfunded Social Security, Medicare, and State and Local Pension Liabilities

International Trade: Does It Jeopardize American Jobs

International Finance and Exchange Rates

The European Debt Crisis

Economic Growth and Development

Nafta, Gatt, Wto: Are Trade Agreements Good for Us

The Line Between Legal and Illegal Goods

Natural Resources, the Environment, and Climate Change

Health Care

Government-Provided Health Insurance: Medicaid, Medicare, and the Child Health Insurance Program

The Economics of Prescription Drugs

So You Want to Be a Lawyer: Economics and the Law

The Economics of Crime

Antitrust

The Economics of Race and Discrimination

Income and Wealth Inequality

Farm Policy

Minimum Wage

Ticket Brokers and Ticket Scalping

Rent Control

Economics of K-12 Education

Economics of College and University Education

Poverty and Welfare

Head Start

Social Security

Personal Income Taxes

Energy Prices

If We Build It, Will They Come and Other Sports Questions

The Stock Market Crashes

Unions

Walmart: Always Low Prices and Low Wages- Always

The Economic Impact of Casino Gambling

The Economics of Terrorism

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