SOLVED

31) In the Great Depression, investment spending fell by ________. A) nine-tenths of one percent. B) nine percent. C) ninety percent. D) nine hundred percent. 32) The Great Depression ________. A) was largely confined to the United States. B) was largely confined to European markets. C) was largely confined to Asian markets. D) was worldwide in scope. 33) During the Great Depression, as real interest rates rose, good credit risks were less likely to seek loans. This process illustrates the phenomenon of ________. A) adverse selection. B) moral hazard. C) poor monetary policy. D) debt deflation. 34) Subprime borrowers ________. A) are those individuals who owe more on their mortgage than the value of their home B) possess a relatively low FICO score. C) rely on mortgage-backed securities to support their mortgage applications. D) are those with an income level below the value of their mortgage. 35) The financial innovation of numerical credit scoring contributed to the ________. A) “democratization of credit” B) reduction of loan-to-value ratios C) “depersonalization of credit” D) reduction of information asymmetries 36) Instruments which provide payments to holders of bonds in the event of default are known as ________. A) collateralized bond obligations. B) tertiary payment devices. C) credit default swaps. D) mortgage-backed securities. 37) The practice of approving mortgages in order to sell them as mortgage-backed securities is known as ________. A) originate-to-distribute B) principal-agent engineering C) predatory lending D) a credit default swap 38) Hedge funds, investment banks, and other non-depository financial firms are known as ________. A) the shadow banking system B) repurchasers C) subprime lenders D) CDOs 39) If the value of a home falls below the amount owed on the mortgage for that property, the house is said to be ________. A) underwater. B) collateralized. C) swamped. D) in short sale. 40) A haircut (in finance) is ________. A) the payment of a block of funds as part of a refinancing arrangement. B) the percentage by which the value of collateral exceeds the value of the loan C) the issue of equities rather than debt in acquiring access to money capital. D) the immediate end of lending to subprime borrowers.