1. Which of the following statements is most correct regarding market turmoil in 2007 and 2008?
a. The federal government decided to bail out some financial corporations in order to prevent more-widespread future failures.
b. The cause of the crisis was the combination of banks over-lending to highly-qualified borrowers and soaring home prices.
c. Financial markets were characterized by excess liquidity during the height of the crisis.
d. Part of the problem was that financial regulations at the time prevented mortgage originators from securitizing and re-selling loans.
e. Sub-prime loans were viewed by investment banks as being very risky but were, in reality, safe and easy to value.
2. Which is true about government debt?
The debt burden is determined by comparing government debt to GDP.
Some of the money that the U.S. government has borrowed went towards funding education and infrastructure improvements
The U.S. government will probably not be able to repay all of its debt.
More than one of the answers are correct.