2008 Financial Crisis

Predatory lending practices actually made the mortgage backed investment riskier.

• true

• false

What was the housing bubble?

• A rapid increase in housing prices driven by irrational decisions.

• A steady increase in housing prices driven by predatory lending.

• A rapid decrease in housing prices driven by low interest rates.

• A rapid rise in interest rates driven by demand.

What happened when the home owners couldn't afford their payments anymore and defaulted on their loans? Check all that apply.

• more houses went on the market, which drove prices down

• big financial institutions stopped buying sub prime mortgages

• the housing demand went up, driving up housing prices

• investors started losing money on their mortgage investments

• big lenders started declaring bankruptcy

Which of the following was the Obama administration's response to the Great Recession of 2007-2009?

• a large tax cut program that included an increase in the child tax credit

• a $6 trillion national stimulus package

• a $787 billion economic stimulus package that included spending increases and tax cuts

• a message to potential homeowners to go ahead and purchase that new home

Which of the following choices best summarizes the root cause of the 2008 Financial Crisis?

• House values increased, leading to an increase in foreclosures​

• Low evaluations of short term bonds led to the collapse of the housing security market​

• Banks lowered lending standards to approve large numbers of mortgages​

• General Motors was unable to take out short term loans

The ____ was an agency formed to insure bank deposits up to a certain amount.

• Social Security

• SEC

• FDIC

• Tennessee Valley Authority

What was one of the main causes of the 2008 Financial Crisis?

• A) Excessive risk-taking by banks

• B) High oil prices

• C) Trade wars

• D) Government shutdowns

Which financial institution's collapse is often seen as a key event in the 2008 Financial Crisis?

• A) Lehman Brothers

• B) Goldman Sachs

• C) JPMorgan Chase

• D) Bank of America

What role did mortgage-backed securities play in the 2008 Financial Crisis?

• A) They were a safe investment

• B) They were a major factor in the crisis

• C) They had no impact

• D) They were banned before the crisis

What was the purpose of the Troubled Asset Relief Program (TARP)?

• A) To provide healthcare to the uninsured

• B) To bail out the auto industry

• C) To purchase toxic assets from banks

• D) To fund infrastructure projects