After a Housing Bubble Bursts and Causes Home Prices to Fall

question 42

Multiple Choice

After a housing bubble bursts and causes home prices to fall, homeowners:

• A) face higher prices on homes when they try to buy a new home.
• B) are grateful that they own a high-value home because they bought when prices were high.
• C) may owe more on their mortgage than the home is worth in the housing market.
• D) will not benefit, but lenders will have lower loan default rates.

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Definitions:

E(XY)

The anticipated outcome of multiplying two stochastic variables together, showing how their variances are interconnected.

COV(X,Y)

A measure of the degree to which two variables X and Y move together, indicating the strength and direction of their linear relationship.

Marginal Probability

The probability of an occurrence of a single event without consideration of any other events.

Coefficient of Correlation

A quantitative gauge assessing the force and trajectory of a linear linkage between a pair of elements.