Mortgage Brokers Often Did Not Make a Strong Effort to Evaluate

question 9

Multiple Choice

Mortgage brokers often did not make a strong effort to evaluate whether the borrower could pay off the loan. This created a

• A) severe adverse selection problem.
• B) decline in mortgage applications.
• C) call to deregulate the industry.
• D) decrease in the demand for houses.

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Definitions:

Board of Governors

The leading body of a central bank system or other regulatory agency, responsible for setting policies and overseeing the institution's operations.

Monetary Policy

The process by which a central bank, currency board, or government manages the supply of money and interest rates to achieve economic objectives like controlling inflation, consumption, growth, and liquidity.

President's Pleasure

A legal term denoting the indefinite detention of a prisoner because the head of state has not exercised their power to limit the period of detention.

Federal Reserve Act

Legislation passed in 1913 that established the Federal Reserve System as the central bank of the United States, intended to provide the country with a safe, flexible, and stable monetary and financial system.