Exam 5: Difficult Cases for the Market, and the Role of Government

The substantial increase in household debt relative to income since the mid 1980s meant that in 2008 many households

Competitive markets generally give consumers and producers correct incentives when

Fannie Mae and Freddie Mac's rapid increase in the percentage of all mortgages held encouraged mortgage lenders to

Since 2002, the Fed has shifted to expansionary monetary policy, then to restrictive policy, and then back to expansionary monetary policy. Policy shifts of this type are most likely to

If production of a good creates external benefits, a competitive market will likely produce

The bundling of mortgages together and the issuing of securities for their financing made it possible for investment banks to

If it is impossible or very costly to exclude nonpaying customers from receiving a good, the good is considered to be

Figure 5-4 -Refer to Figure 5-4. If the government uses a pollution tax, how much of a tax must be imposed on each unit of production?

The key explanation for the prevalence of waterway pollution is

When expansionary monetary policy pushes interest rates to artificially low levels,

Which of the following is most consistent with the idea that if it's worth doing, it's worth doing imperfectly?

Externalities cause the market mechanism to allocate goods and resources inefficiently because

What was the original stated purpose of Fannie Mae and Freddie Mac?

Which of the following is most likely to result from a rising household debt/income ratio?

If pollutants emitted by firms in the steel industry increase, but there is no increase in the costs borne by these firms, you could conclude that

Which of the following is a valid reason for government provision rather than market provision of certain economic goods and services?

Based on the rising housing prices of 2000-2005, many buyers opted for interest-only loans and variable rate mortgages with little or no down payment because

Which of the following was a contributing factor to the housing boom and bust and the financial crisis of 2008?

Adjustable rate mortgages became increasingly attractive and grew as a percentage of total outstanding mortgages during 2002 to 2004 because

Suppose external costs are present in a market which results in the actual market price of $70 and market output of 150 units. How does this outcome compare to the efficient, ideal equilibrium?