Exam 30: Financial Crises, Panics, and Unconventional Monetary Policy

Which of the following described the attitude of most economists toward the U.S.-based automobile sector during the 2008 recession?

A bank that is liquid:

Why do economists worry more about the collapse of the financial sector than other sectors?

The government has bailed out homeowners who are in danger of foreclosure. Furthermore, future homeowners may deduce that the government will again bail them out in the case of future economic turmoil. The government inadvertently has created what is known as:

What are extrapolative expectations,and why are they essential for the formation of a bubble?

How can monetary policy be designed to specifically flatten the yield curve?

To avoid the law of diminishing control, the government could:

In 2017 and 2018, the Fed has wound down unconventional policy:

Explain what herding and leverage are and how they can lead to a bubble.Also explain why leverage can cause the bursting of a bubble to be worse than it otherwise would be.