Question 1

The mathematics of amortization for mortgage loans must utilize the

Accepted Answer

A) interest rate. 
B) payment amount. 
C) period of time over which the debt will be repaid. 
D) all of the options are correct. 
A) interest rate. 
B) payment amount. 
C) period of time over which the debt will be repaid. 
D) all of the options are correct.

Question 2

A notable macroeconomic effect of the bursting U.S. housing bubble in 2007 was a

Accepted Answer

A) sharp reduction in Real GDP that increased the unemployment rate by two percentage points. 
B) marked expansion in the construction sector of the economy. 
C) modest reduction in the growth rate of aggregate consumption spending. 
D) all of the options are correct. 
A) sharp reduction in Real GDP that increased the unemployment rate by two percentage points. 
B) marked expansion in the construction sector of the economy. 
C) modest reduction in the growth rate of aggregate consumption spending. 
D) all of the options are correct.

Question 3

A mortgage loan that would allow a borrower to repay none of the principal of the debt over the first few (typically five or ten)years of the mortgage could be called

Accepted Answer

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

Question 4

"Exotic" mortgages require a down payment of at least 20%.

Accepted Answer

A) True 
 B)False

Question 5

Among the key ingredients of what a house is fundamentally worth would be

Accepted Answer

A) the opportunity cost of the land on which the house is located. 
B) the quality of the school system in which the house is located. 
C) "location, location, location"! 
D) all of the options are correct. 
A) the opportunity cost of the land on which the house is located. 
B) the quality of the school system in which the house is located. 
C) "location, location, location"! 
D) all of the options are correct.

Question 6

A notable macroeconomic effect of the bursting U.S. housing bubble in 2007 was a

Accepted Answer

A) modest reduction in Real GDP growth of one percentage point. 
B) marked expansion in the construction sector of the economy. 
C) dramatic contraction of aggregate consumption spending. 
D) all of the options are correct. 
A) modest reduction in Real GDP growth of one percentage point. 
B) marked expansion in the construction sector of the economy. 
C) dramatic contraction of aggregate consumption spending. 
D) all of the options are correct.

Question 7

The mathematics of amortization for mortgage loans must utilize the

Accepted Answer

A) structure of marginal tax rates. 
B) payment frequency. 
C) period of time over which the debt will be repaid. 
D) payment frequency and the period of time over which the debt will be repaid. 
A) structure of marginal tax rates. 
B) payment frequency. 
C) period of time over which the debt will be repaid. 
D) payment frequency and the period of time over which the debt will be repaid.

Question 8

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

Accepted Answer

A) previous homeowners were able to move into apartments. 
B) mortgage interest rates remained relatively low. 
C) Democrats in control of Congress passed new tax cuts for distressed homeowners. 
D) all of the options are correct. 
A) previous homeowners were able to move into apartments. 
B) mortgage interest rates remained relatively low. 
C) Democrats in control of Congress passed new tax cuts for distressed homeowners. 
D) all of the options are correct.

Question 9

Size and age are "fundamental" determinants of the price of any house.

Accepted Answer

A) True 
 B)False

Question 10

Homeowner with good credit history usually will be

Accepted Answer

A) wise enough never to borrow any of their home equity for any purpose. 
B) wise enough to borrow part of their home equity only for sensible goals, like a big new SUV. 
C) able to borrow part of the equity in their home to achieve reasonable financial goals. 
D) unaware that borrowing part of the equity in their home will increase their monthly payments. 
A) wise enough never to borrow any of their home equity for any purpose. 
B) wise enough to borrow part of their home equity only for sensible goals, like a big new SUV. 
C) able to borrow part of the equity in their home to achieve reasonable financial goals. 
D) unaware that borrowing part of the equity in their home will increase their monthly payments.

Question 11

The "exotic" mortgage instrument of recent years is exemplified by the

Accepted Answer

A) bank mortgage loan. 
B) "magical-mystery" mortgage. 
C) "negative-amortization" mortgage. 
D) "traditional" mortgage. 
A) bank mortgage loan. 
B) "magical-mystery" mortgage. 
C) "negative-amortization" mortgage. 
D) "traditional" mortgage.

Question 12

If homeowners with no savings purchased a $250,000 home using 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 might be forced to

Accepted Answer

A) pay off their car loan early. 
B) move into the YMCA. 
C) declare bankruptcy. 
D) buy a second home in their new city without first selling their first home. 
A) pay off their car loan early. 
B) move into the YMCA. 
C) declare bankruptcy. 
D) buy a second home in their new city without first selling their first home.

Question 13

The traditional mortgage amortization schedule specifies a monthly payment that is

Accepted Answer

A) increasing over the life of the mortgage. 
B) decreasing over the life of the mortgage. 
C) constant over the life of the mortgage. 
D) first increasing, then decreasing, over the life of the mortgage. 
A) increasing over the life of the mortgage. 
B) decreasing over the life of the mortgage. 
C) constant over the life of the mortgage. 
D) first increasing, then decreasing, over the life of the mortgage.

Question 14

Housing "affordability" is measured by the ratio of local housing price to local income.

Accepted Answer

A) True 
 B)False

Question 15

A mortgage loan that would allow a borrower to purchase a home paying only the paperwork costs of the loan at closing could be called a

Accepted Answer

A) "liar" loan. 
B) "traditional" mortgage. 
C) "zero-down" mortgage. 
D) all of the options are correct. 
A) "liar" loan. 
B) "traditional" mortgage. 
C) "zero-down" mortgage. 
D) all of the options are correct.

Question 16

A mortgage that allows the borrower to choose the monthly payment for a few years is a

Accepted Answer

A) traditional, thirty-year fixed rate mortgage. 
B) pay option adjustable rate mortgage. 
C) credit default swap. 
D) "liar loan". 
A) traditional, thirty-year fixed rate mortgage. 
B) pay option adjustable rate mortgage. 
C) credit default swap. 
D) "liar loan".

Question 17

The company that was the largest seller of credit default swaps was

Accepted Answer

A) AIG. 
B) Fannie Mae. 
C) Freddie Mac. 
D) the Fed. 
A) AIG. 
B) Fannie Mae. 
C) Freddie Mac. 
D) the Fed.

Question 18

Compared to the traditional mortgage amortization schedule, "interest-only" mortgages and "negative-amortization" mortgages require

Accepted Answer

A) larger principal payments later in the mortgage. 
B) smaller principal payments later in the mortgage. 
C) constant principal payments later in the mortgage. 
D) no principal payments later in the mortgage. 
A) larger principal payments later in the mortgage. 
B) smaller principal payments later in the mortgage. 
C) constant principal payments later in the mortgage. 
D) no principal payments later in the mortgage.

Question 19

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

Accepted Answer

A) Michigan. 
B) Iowa. 
C) California. 
D) Ohio. 
A) Michigan. 
B) Iowa. 
C) California. 
D) Ohio.

Question 20

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 fewer 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

Exam 13: The Housing Bubble

The mathematics of amortization for mortgage loans must utilize the

A notable macroeconomic effect of the bursting U.S. housing bubble in 2007 was a

A mortgage loan that would allow a borrower to repay none of the principal of the debt over the first few (typically five or ten)years of the mortgage could be called

"Exotic" mortgages require a down payment of at least 20%.

Among the key ingredients of what a house is fundamentally worth would be

A notable macroeconomic effect of the bursting U.S. housing bubble in 2007 was a

The mathematics of amortization for mortgage loans must utilize the

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

Size and age are "fundamental" determinants of the price of any house.

Homeowner with good credit history usually will be

The "exotic" mortgage instrument of recent years is exemplified by the

If homeowners with no savings purchased a $250,000 home using 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 might be forced to

The traditional mortgage amortization schedule specifies a monthly payment that is

Housing "affordability" is measured by the ratio of local housing price to local income.

A mortgage loan that would allow a borrower to purchase a home paying only the paperwork costs of the loan at closing could be called a

A mortgage that allows the borrower to choose the monthly payment for a few years is a

The company that was the largest seller of credit default swaps was

Compared to the traditional mortgage amortization schedule, "interest-only" mortgages and "negative-amortization" mortgages require

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

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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