The financial crisis of 2007-2008 was exacerbated by subprime mortgage loans. These loans were made to borrowers

• purchasing low-priced homes.
• more likely to default on their loans.
• who were not first-time home buyers.
• at exceptionally low rates.

b. Subprime mortgage loans were one of the factors that exacerbated the financial crisis of 2007-2008 because they resulted in

• an increase in the supply of housing and a rapid increase in home prices that was sustainable.
• an increase in demand for housing and a rapid increase in home prices that was unsustainable.
• refinancing on the part of current home owners.
• many lenders competing for the same business.

c. Mortgage-backed securities were one of the factors that exacerbated the financial crisis of 2007-2008 because they

• reduced the regulation that banks faced after issuing these subprime loans, which encouraged this type of lending.
• changed the risk exposure that banks faced after issuing these subprime loans, which discouraged this type of lending.
• increased the risk exposure that banks faced after issuing these subprime loans, which discouraged this type of lending.
• reduced the risk exposure that banks faced after issuing these subprime loans, which encouraged this type of lending.

d. American International Group (AIG) exacerbated the financial crisis of 2007-2008 by

• eliminating collateralized default swaps that had embedded mortgage-loan risk.
• issuing billions of dollars of collateralized default swaps that had embedded mortgage-loan risk.
• hiding collateralized default swaps that had embedded mortgage-loan risk.
• buying collateralized default swaps that had embedded mortgage-loan risk.