Explain the difference between a secured and an unsecured loan, and the interest rate you would expect to see charged on each (all other factors equal).
What will be an ideal response?
A secured loan is a loan that is backed by collateral. For example, with a mortgage the property serves as the collateral or in the case of most auto loans, the automobile is the collateral that secures the loan. The lender has the right to seize the collateral in the event of default and the sale of the collateral will eliminate or minimize the losses from default. The collateral greatly reduces the risk from both adverse selection and moral hazard. Unsecured loans, like credit card debt, are not backed by collateral. Since unsecured loans present greater risk they usually carry higher interest rates.
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It is not surprising to see a rather __________ volume of mergers and acquisitions in the United States given its __________-oriented financial system
A) high; banking B) high; markets C) low; banking D) low; markets
Given AD1 and AS1 in Figure 8.3, the classical approach to achieving full employment at an output of $300 billion would be to
A. Increase the growth of the money supply to shift AD1 to AD2. B. Do nothing and wait for "natural" market forces to achieve full employment. C. Increase taxes and increase government spending to shift AD1 to AD2. D. Use all available supply-side options.