1. What is an adjustable rate subprime mortgage?

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2. What risk did banks run when they made a practice of granting adjustable rate subprime mortgages?

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3. What was the basic underlying assumption held both by subprime borrowers and banks that made subprime mortgages seem like a reasonable practice?

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4. Explain how efforts to avoid a recession earlier in the decade actually contributed to the serious recession that accompanied the economic crisis of 2008.

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5. Observers suggest that the credit crisis of 2008 clearly shows that everyone-from individuals to the government-needs to change the way they manage their money. Name five areas in which fundamental changes are needed.

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