Which statement describes the role that derivatives trading played in the recent housing market bubble?
a. Deriving their value from real estate speculation, derivatives created a volatile value system.
b. Derivatives fluctuate widely in value, which led many investors to buy, only to lose large sums upon downward fluctuation.
c. Derivatives forced many banking institutions to sell or close, condensing the control of the finance industry into a few small hands.
d. Derivatives became so complex that no one could understand them, which masked losses and made assets extremely difficult to evaluate.
Question 2
Which of the following policy reforms would be most indicative of a laissez-faire approach?
a. eliminating a state's sales tax
b. raising tax rates on top income earners
c. issuing new currency
d. using environmental laws to shut down industries that pollute excessively
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