What Role Did the Credit-Rating Agencies Play Leading Up to the Start

question 47

Multiple Choice

What role did the credit-rating agencies play leading up to the start of the financial crisis in 2007?

• A) Inaccurate ratings provided by credit-rating agencies helped promote risk taking throughout the financial system.
• B) The credit-rating agencies were the first to see signs of trouble, and they developed more stringent standards as the housing bubble evolved.
• C) Solid ratings provided by credit-rating agencies helped limit risk taking throughout the financial system.
• D) The credit-rating agencies were largely uninvolved with the financial crisis.

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Definitions:

Income

The financial return or compensation received by an individual or household from various sources like labour, investments, or business ventures.

Budget Constraints

A financial restriction that limits the amount of money that can be spent on different categories of goods and services.

Optimum

The most favorable condition or level for growth, reproduction, or success.

Substitutes

Two goods for which an increase in the price of one leads to an increase in the demand for the other.