Financial Crisis Flashcards
Multiple Choice
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Flashcards based on lecture notes about the 2008 financial crisis.
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17 Terms
Recession
A contracting economy that lasts for at least six months.
Leverage
The use of borrowed money to increase financial gains.
Mortgage
A loan for the purchase of property.
Collateralized Debt Obligation (CDO) / Mortgage-Backed Security
A collection of mortgages that can be sold or traded.
Credit Score (FICO score)
A number used to predict a borrower's ability to repay a loan (300-850).
Default
Failure to repay a loan on time.
Interest Rate
The amount that a lender charges to borrow money.
Subprime Lending
The practice of giving loans to someone with a low credit score.
Adjustable-Rate Mortgage (ARM)
A mortgage whose interest rate changes over time.
Predatory Lending
The use of unfair or deceptive practices to convince borrowers to take out a loan.
Bubble
A rapid and unsustainable increase in the price of a commodity.
Foreclosure
A bank's repossession of a property after a borrower defaults on a loan.
Underwater Mortgage
When the amount owed on a mortgage is more than the market value of the property.
Troubled Asset Relief Program (TARP) / "The Bailout"
A $700 billion government program to stabilize the US financial industry (October 2008).
Short
To bet money that a stock's value will decrease.
Credit Default Swap
Insurance against loan default or credit rating downgrade.
The 2008 Financial Crisis
A global economic crisis set off by the collapse of the US housing market.
