Home Equity Loans

question 54

Multiple Choice

Home equity loans

• A) Are based on the original purchase price of a home.
• B) Have interest that is tax-deductible.
• C) Do not have any security attached to the loan.
• D) Have a 60-day grace period.
• E) Are the most expensive loans available.

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Definitions:

Diminishing Marginal Utility

The principle stating that as a person consumes more units of a good, the satisfaction (utility) gained from consuming each additional unit decreases.

Giffin Good

A type of good for which demand increases as the price increases, contradicting the basic law of demand due to the income effect.

Income Effect

The relationship between changing income levels in an economy or for individuals and the subsequent effect on goods and services demand.

Substitution Effect

Describes how consumers react to an increase in a good's price by substituting another good, affecting the quantity demanded.