Discount rate-Prime rate and the Subprime rates of interest
What is the difference among the discount rate, prime rate and the subprime rates of interest? Which interest rate in particular build the 2008 recession? Explain how that happened.
Expert
Discount rate refers to that interest rate which would be charged by the Federal bank to the depository institutions for borrowing its reserves. Prime rate refers to that which banks charge the creditworthy customers and is just 3 percentage points over fed funds rate. When the creditworthiness lowers, the interest rate increases. Subprime rates refer to those charged on subprime loans offered to the less creditworthy customers. Both prime and subprime rates are charged on all loans offered by banks and differs based on the creditworthiness of the customer. Subprime interest rates created the 2008 recession. Sales of single family homes peaked in 2005, with the increase in population as well as the need for home ownership, which resulted in a housing boom leading to rocketing home prices. As the prices surged upwards drastically, homes became more expensive and the subprime interest rates were also high. Subprime loans with adjustable rates, extremely low or no down payments, etc were offered and borrowed with the hope that they can be paid off when the prices escalate more. However, owing to fraudulent transactions, subprime mortgage defaults emerged, which led to the fall in home sales in 2006 which eventually led to the end of price escalation. With the prices much lower than the purchase price, more and more mortgage loans were defaulted, which led to the failure and shutdown of a few well-known banks. Thus this created the 2008 recession
Tom reimburses $5.00 for a ticket to see a present hit movie. If Tom was willing to reimburse up to $7.00 for that ticket, his consumer surplus equals: (1) $5.00 (2) $2.00 (3) $7.00 (4) Tom does not receive any consumer surplus as he purchased the ticket.
Why can be value of MPC be not more than one? Answer: The value of MPC will not be more than one since increment in consumption (ΔC) can’t be more than
Elucidate the differences among the frictional, structural, and cyclical forms of unemployment.
When firms bear the legal incidence of a tax, this is backward shifted while: (1) firms burden consumers by raising their prices. (2) the tax burden is borne by workers in the form of lower wages. (3) resource suppliers seek higher factor payments to
Can someone help me in finding out the right answer from the given options. The consumer maximizes utility whenever the spending patterns cause: (1) Marginal utility of each and every good to be at its maximum value. (2) Marginal utilities of each and every goods cons
The demand curve for DVD games is a straight line, therefore its slope: (1) Is constant, although price elasticity of demand drops/falls as output increases. (2) Price elasticity are both stable. (3) Is constant, although price elasticity of demand increases as the pr
In a graph of competitive market in equilibrium, the net surpluses producers and consumers enjoy generally equivalents the area among the: (i) Demand and supply curve however to the left of point of the market equilibrium. (ii) Horizontal axis and a 45°line origin
Macroeconomics is mainly concerned along with all things as the: (i) decisions individuals and firms make while prices change. (ii) resource usage and technology bases of firms. (iii) levels of national employment and income. (iv) movements within the
Can someone help me in finding out the right answer from the given options. The substitution effect is fully explained when: (i) Brandon just eat tofu since he is on a diet. (ii) A rise in the price of corn chips drives up demand for the salsa. (iii)
The balance of trade demonstrates a deficit of Rs 300 crore. The values of exports are Rs 500 crore. Determine the value of imports? Answer: Discover Q & A Leading Solution Library Avail More Than 1437247 Solved problems, classrooms assignments, textbook's solutions, for quick Downloads No hassle, Instant Access Start Discovering 18,76,764 1931648 Asked 3,689 Active Tutors 1437247 Questions Answered Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!! Submit Assignment
18,76,764
1931648 Asked
3,689
Active Tutors
1437247
Questions Answered
Start Excelling in your courses, Ask an Expert and get answers for your homework and assignments!!