Many Borrowers Defaulted on Subprime Mortgages Ultimately Disrupting Financial Markets

question 75

Multiple Choice

Many borrowers defaulted on subprime mortgages ultimately disrupting financial markets by August 2007. Which of the following is a likely result of this financial disruption?

• A) The AD curve likely shifted left which caused a positive inflation gap
• B) The AD curve likely shifted right which caused a positive inflation gap
• C) The AD curve likely shifted left which caused an upward movement along the MP curve to a higher general equilibrium interest rate
• D) The AD curve likely did not shift
• E) none of the above

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Definitions:

Domestic Investments

Investment in capital assets by a country's citizens and businesses within its own borders.

Export Promotion

Strategies and policies designed to increase the amount of goods and services sold to foreign countries.

Domestic Market

The domestic market pertains to the commercial activities and transactions within a country's borders, excluding international trade.

Technological Base

Refers to the foundation of technology, including the knowledge, tools, and processes that support the economic and industrial development of a country or region.