Banks lost trillions of dollars when the housing bubble collapsed because:
A. many large banks held massive quantities of mortgage-backed securities.
B. most of their customers had to close their accounts due to foreclosures.
C. many borrowers defaulted on their mortgages.
D. Both A and B are correct.
Answer: D
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If wealthy U.S. consumers save most of their tax cut, this means that, compared to government spending changes,
a. tax changes would have a higher multiplier effect. b. tax changes would have a weaker multiplier effect. c. government spending would have a weaker multiplier effect. d. U.S. consumers would spend all of their tax cut.
Suppose at the current level of labor used, MRP = $100 and MFC = $50. To maximize profits, the firm should
A) hire more labor. B) reduce the level of labor. C) maintain the current level of labor. D) shut down.