How Did Deregulation of the Mortgage Industry in 1999 Help

question 88

Multiple Choice

How did deregulation of the mortgage industry in 1999 help produce the housing crisis of 2007 and 2008?

• A) It drove housing prices down by preventing too many qualified people from obtaining the mortgages needed to purchase homes.
• B) It allowed many new mortgage companies to form, offering "predatory" loans that people could not afford to repay.
• C) It made foreclosures almost impossible under the law and allowed many people to stop paying their mortgages with no monetary penalties.
• D) It eliminated most mortgage companies and forced potential homeowners to pay cash for their homes.
• E) It increased property taxes to the point that many homeowners were forced to sell their homes.

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Definitions:

Giffen Good

A type of good for which demand increases as its price increases, contradicting the basic laws of demand in economics due to the impact of strong income effects.

Demand Curve

A graph showing the relationship between the price of a good and the quantity of that good consumers are willing and able to purchase at various prices.

Labor Supply Curve

A graphical representation showing the relationship between the wages offered and the quantity of labor workers are willing to supply.

Backward-Bending

A term often used in labor economics to describe the supply curve of labor, which can bend backwards at higher wage levels, indicating that higher wages can lead to a decrease in labor supply.