Borrowers who did not meet their standards were forced to pay higher interest rates to subprime lenders, but the companies essentially persuaded investors to treat a vast number American families as if they were interchangeable. They took messy bunches of loans, with risks as variable as snowflakes, and created securities of uniform quality, easy to buy and sell. The result was one of the most popular investment products ever created. And in its absence, experts on housing finance say that fewer borrowers would qualify for the best interest
in 1978 and proposed that profit was less important than fairness in the relationship. According to Hatfield (2011) “According to Equity theory, people feel most comfortable when they are getting exactly what they deserve from their relationships—no more and certainly no less” Exchange Theory is more concerned with under-benefit as a disadvantage but Equity Theory places a greater emphasis on both under-benefit and over-benefit. Under-benefits are likely to provoke a sense of anger and resentment and over-benefits are likely to provoke a sense of guilt. The Equity model suggests that a person would be driven to restore the equity within an unbalanced relationship by either reducing their input or increasing their outputs and it is the inability to reach balance that can lead to the breaking of the relationship. Investment theory focusses on the extent to which commitment is determined by investment in a relationship rather than solely satisfaction or reward.
The author of this article, Jeannine Aversa, is stating that key economic indicators point to the likelihood of a recession. Aversa supports her thoughts by noting the real GDP; “crawled at a 1.3 percent pace in the opening quarter of 2007…even weaker than the sluggish 2.5 percent rate in the closing quarter of last year.” The author suggests the main cause of the economic slowdown is due to “the housing slump.” Consumer expenditures are driving the economy, but Aversa worries about a “fallout from risky mortgages and rising energy prices.” Uncertainty of the Feds actions concerning the interest rates is leading to lower investment spending. The author also states that the Feds decision on raising or lowering the interest is due to the
To increase their taxes would be appropriate and this would be stream lining taxes at a time when the economy needs a boost. The Keynesian economists would look at government spending as a means for the government to stop the little growth the economy has had and is to have. The government spending would make it so the people would not have the money to spend within the states and they would have to go without needs and desires. This in turn would be the money that could be used within the economy.
When the government prevents prices from adjusting naturally to supply and demand, efficiency is improved in the economy. ANSWER: F TYPE: T KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxviii]. A market economy cannot possibly produce a socially desirable outcome because individuals are motivated by their own selfish interests. ANSWER: F TYPE: T KEY1: D SECTION: 2 OBJECTIVE: 7 RANDOM: Y [cxix]. While the invisible hand cannot guarantee efficiency, it is better at guaranteeing equity.
“The net export effect of expansionary monetary policy will be in the same direction as the monetary policy effect”.1 Recommended Course of Action Although both fiscal policy and monetary policy prove to have beneficial effects on an economy during a contractionary period, we believe that the government should use a combination of both policies…… - The money supply may be ineffective, but in the end people want to make sure that they will have money to save up in case of emergencies. There is no change in investment spending meaning little change in aggregate demand. - Further to this, the fiscal policy may be ineffective, as the extensive “time lags” may dig us deeper, creating a depression. - To what extent?? ?
Of greatest macroeconomic significance is home-secured borrowing, & it is contended that the housing bubble & strength of consumption in the economy are linked to the "household debt bubble," which could burst if interest rates rise & housing prices stagnate or decline. A step up in business investment in the US is required to forestall economic crisis. Further, the US economy's problem lies in the pursuit of wealth by a few at the expense of the population as a whole; only a radical reconstruction of society can arrest this. Tables, Charts. D. Edelman Foster, John B.
One of these conclusions is that the economy will stimulate because of the changes being made, or the economy will slow down. The goal of the government is to make sure the economy doesn’t slow down. In this paper
As John Verdant introduces two families with similar economic conditions but completely different values, it is not difficult to find out that the family believes having more actually harms themselves (Verdant, 152-155). I believe people who are less obsessed with consumerism would have a better living standards if they were living in a society with scarce materials. However, those people who are obsessed with consumerism would be willing to conduct some unethical things in order to gain self-interested benefits. On the other hand, nowadays thrift is a way of showing a person is well-educated and money-conscious. In fact thrift is highly valued in many Asian countries’ value systems.
Incentives are offered to people in order to induce them to make certain choices or behave in a certain way. They can be either positive or negative. For example, positive incentives like discounts and rewards are beneficial; whereas negative incentives such as fines and penalties are not. Understanding how people respond to both positive and negative incentives is important in analyzing how society operates as a whole. Ultimately, it can be argued that “incentives are the cornerstone of modern life” (Levitt, 12), and having a grasp of this concept is a key to solving social and economic riddles.