Recall the Application About How the Process of Securitization in Financial

question 45

Multiple Choice

Recall the Application about how the process of securitization in financial markets led to a rise in the rate of home ownership in the U.S. housing market to answer the following question(s) .
-Recall the Application. The loans made to borrowers who have a limited ability to actually repay their mortgages are known as

• A) bankruptcy loans.
• B) stimulus loans.
• C) no-fault loans.
• D) subprime loans.

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Definitions:

Formal Agreement

refers to a legally binding contract between parties that outlines specific obligations and rights.

Covert Collusion

A secret agreement between firms to fix prices, limit production, or engage in other practices to restrict competition illegally.

Kinked Demand Curve Model

An economic model suggesting that price competition among firms may be rigid because a firm raising its price does not lead to competitors following suit, while price decreases are matched. This results in a demand curve with a kink.

Marginal Revenue Curve

A graphical representation that shows the change in total revenue resulting from selling one additional unit of a good or service.