To the Extent That the Undervaluation of the Riskiness of Mortgage-Backed

question 77

Multiple Choice

To the extent that the undervaluation of the riskiness of mortgage-backed securities contributed to the financial crisis of 2008-2009 in the United States,blame for this mistake lies with:

• A) mortgage brokers.
• B) investment banks.
• C) rating agencies.
• D) government policymakers.

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Definitions:

Preference

An individual's choice or predilection towards certain ideas, objects, or outcomes over others.

Error Management Theory

A theory suggesting that humans and other animals have evolved biases in judgement and decision-making processes to avoid more costly errors.

Omission Bias

The tendency to take whatever course of action does not require you to do anything (also called the default option).

Status Quo Bias

A cognitive bias favoring the existing state of affairs or the current baseline (the "status quo"), often leading to resistance against change.