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Unit 5 BBB4M Exam Study Notes Questions and Answers
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Unit 5 BBB4M Exam Study Notes Questions and Answers
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Unit 5 BBB4M Exam Study NotesQuestions and Answers
What was the 2008 financial crisis? - Answer-Price of houses began to drop in 2007, as
a result
Thousands of homeowners who had qualified for subprime mortgages could not keep
up with payments and defaulted on their mortgages, Banks foreclosed on these homes,
but because there was no market for them, these assets were worthless, Banks
stopped lending and many went out of business.
Without credit from banks, consumers stopped spending, Manufacturers and retailers
began to lose money and lay off workers, The market fell and many people lost savings
as pension plans and retirement savings plans decreased.
What was the effect of the crash on Canada - Answer-Did not affect Canada as deeply
as other countries, Canadian banks did not invest in subprime mortgages in Canada,
Home prices here did not decrease as much as those in the United States, Canadian
banks that had invested in U.S. banks were affected, Demand for Canadian goods,
especially raw materials like oil and lumber, dropped.
What was the rise and fall of GM motors? - Answer-GM was known and popular for
producing large cars, as price of oil rose, consumers wanted to avoid driving cars that
used a lot of gasoline, Japanese automakers Toyota, Nissan, and Honda produced
small, efficient vehicles, Set up plants in the United States; employees were not
unionized, therefore labour was cheaper, During financial crisis that began in 2008,
consumers cut spending on gas-guzzling vehicles, GM filed for bankruptcy
What are subprime mortgages? - Answer-A type of mortgage granted to borrowers with
lower credit ratings who would not normally be able to qualify for conventional
mortgages, As these borrowers are seen as having a higher-than average risk of
defaulting on their loans, banks often charge higher interest rates on subprime
mortgages
What is foreclosure? - Answer-The legal process through which an owner's right to their
property is terminated, usually because they have failed to pay back their mortgage, In
this case, the bank usually takes the house back and sells it, using the proceeds to pay
off the debt
What is Collateral? - Answer-An asset used to guarantee a loan, to be forfeited in the
event of a default
What are Porter's Five Forces of Competition? - Answer-Competitive Rivalry, Supplier
power, Buyer power, threat of substitution, and threat of new entry
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