Some Analysts Blame the Last Economic Crisis on Fed Policy

question 161

Multiple Choice

Some analysts blame the last economic crisis on Fed policy.They argue that:

• A) a restrictive policy lowered aggregate demand and GDP.
• B) low interest rates encouraged excessive mortgage borrowing,leading to the housing bubble.
• C) the Fed securitized the mortgages into collateralized debt obligations and encouraged excessive risk taking.
• D) the Fed did not adequately regulate the mortgage market's credit standards for issuing loans as required by the Federal Reserve Act.

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Definitions:

Percentage of Receivables Basis

An accounting method used to estimate the amount of receivables that will not be collected by calculating a percentage of the total receivables.

Income Statement Relationships

The connections between various financial items on the income statement, illustrating how sales revenue affects net income.

Nontrade Receivables

Monetary claims against others that cannot be classified as trade receivables, often arising from financial transactions.

Loans

Sums of money borrowed that are expected to be paid back with interest.