The 2008 Financial Crisis Quiz long make up

What was the fatal mistake made by the US government in 1999?

• Passing laws to help low-income earners

• Lowering interest rates

• Increasing discrimination against low-income earners

• Repealing the Glass-Steagall Act

What was the result of the dot-com bubble in March 2000?

• A rapid economic growth

• A decrease in public and market trust in the economy

• An increase in stock prices

• A surge in internet companies' profits

What was the aim of lowering interest rates to one percent by the Federal Reserve?

• To prevent the collapse of investment banks

• To regulate the housing market

• To decrease the number of subprime loans

• To increase spending and recover confidence in the American economy

What were the mortgage deals that required no income, no job, and no assets called?

• Liars loans

• Prime loans

• Subprime loans

• Low doc loans

What were mortgage-backed securities bundled as shares sold to investors called?

• CDOs

• AAA-rated products

• Subprime mortgage debt

• Mortgage credit default swaps

What was the main reason for the false ratings of mortgage-backed securities as AAA by rating agencies?

• Desire for higher profits

• Regulatory pressure from the government

• Fear of losing business to other rating agencies

• Lack of understanding of the financial instruments

What financial instrument was designed as insurance against failed mortgage debt products?

• Subprime mortgage debt

• Mortgage credit default swaps

• CDOs

• Mortgage-backed securities

What was the impact of increasing interest rates on adjustable rate loans?

• Decreased monthly payments for homeowners

• Increased monthly payments for homeowners

• Shifted the loans to fixed rates

• No impact on monthly payments

What led to a rapid devaluation of the financially engineered products in 2007?

• Rising home prices

• Stable subprime mortgage market

• High default rates by homeowners

• Decreasing demand for homes

What was the main reason for the rapid increase in subprime mortgage debt between 2000 and 2007?

• Rising interest rates

• Relaxed credit scores for mortgage loans

• Repeal of the Glass-Steagall Act

• Decrease in discrimination against low-income earners