Answer the questions using Figure 1

1. (a) Describe how the trend of the different types of secured bank

   lending to UKs households has changed over time. [5 marks]

2. (b) Banks consider loans to households and firms as risky. In your view, why is this the case? In the course of your answer make reference to the trends you describe in (a) above, and refer to and explain the following terms in your answer:

i. uncertainty ii. moral hazard

iii. asymmetric information.

(c) Risky loans may lead to a bank failure but the invention of the computer is the major factor behind the decline of the banking industry. Is this statement true, false or uncertain? Explain your answer.

1. Figure 1 displays the data for secured bank lending to households in the United Kingdom (UK). 140000 120000 100000 80000 Thousands 60000 40000 20000 O 01/01/2007 01/05/2007 01/09/2007 01/01/2008 1/05/2008 01/09/2008 600C// 01/05/2009 600/60/ 01/01/2010 01/05/2010 /6/ // 01/05/2011 01/09/2011 01/01/2012 01/05/2012 01/09/2012 01/01/2013 01/05/2013 /60/ 01/01/2014 01/05/2014 01/09/2014 01/01/2015 01/05/2015 01/09/2015 01/01/2016 01/05/2016 01/09/2016 01/01/2017 01/05/2017 01/09/2017 01/01/2018 01/05/2018 01/09/2018 // 01/05/2019 01/09/2019 01/01/2020 01/05/2020 01/09/2020 01/01/2021 New mortgages Remortgaging Other lending Figure 1 (a) Describe how the trend of the different types of secured bank lending to UK's households has changed over time. [5 marks] (b) Banks consider loans to households and firms as risky. In your view, why is this the case? In the course of your answer make reference to the trends you describe in (a) above, and refer to and explain the following terms in your answer: i. uncertainty ii. moral hazard iii. asymmetric information. [15 marks] (c) Risky loans may lead to a bank failure but the invention of the computer is the major factor behind the decline of the banking industry'. Is this statement true, false or uncertain? Explain your answer. [10 marks] 1. Figure 1 displays the data for secured bank lending to households in the United Kingdom (UK). 140000 120000 100000 80000 Thousands 60000 40000 20000 O 01/01/2007 01/05/2007 01/09/2007 01/01/2008 1/05/2008 01/09/2008 600C// 01/05/2009 600/60/ 01/01/2010 01/05/2010 /6/ // 01/05/2011 01/09/2011 01/01/2012 01/05/2012 01/09/2012 01/01/2013 01/05/2013 /60/ 01/01/2014 01/05/2014 01/09/2014 01/01/2015 01/05/2015 01/09/2015 01/01/2016 01/05/2016 01/09/2016 01/01/2017 01/05/2017 01/09/2017 01/01/2018 01/05/2018 01/09/2018 // 01/05/2019 01/09/2019 01/01/2020 01/05/2020 01/09/2020 01/01/2021 New mortgages Remortgaging Other lending Figure 1 (a) Describe how the trend of the different types of secured bank lending to UK's households has changed over time. [5 marks] (b) Banks consider loans to households and firms as risky. In your view, why is this the case? In the course of your answer make reference to the trends you describe in (a) above, and refer to and explain the following terms in your answer: i. uncertainty ii. moral hazard iii. asymmetric information. [15 marks] (c) Risky loans may lead to a bank failure but the invention of the computer is the major factor behind the decline of the banking industry'. Is this statement true, false or uncertain? Explain your answer. [10 marks]