Question 1

In response to the economic downturn, the federal government enacted a fiscal stimulus bill with funding in excess of $700 billion.

Accepted Answer

A) True 
 B)False  True

Question 2

Both monetary policy and fiscal policy were used in response to the recession of 2007-2009.

Accepted Answer

A) True 
 B)False  True

Question 3

Most economists feel that overly strict financial regulation from 2000 to 2006 contributed to the financial crisis of 2007-2009.

Accepted Answer

A) True 
 B)False  False

Question 4

Which of the following was a lesson from the 2007-2009 financial crisis?

Accepted Answer

A) The financial system needed more leverage in order to operate. 
B) The job of stabilizing the economy should be assigned exclusively to monetary policy. 
C) Monetary policy is finished once the Fed reduces the federal funds rate to zero. 
D) The business cycle still exists. 
A) The financial system needed more leverage in order to operate. 
B) The job of stabilizing the economy should be assigned exclusively to monetary policy. 
C) Monetary policy is finished once the Fed reduces the federal funds rate to zero. 
D) The business cycle still exists.

Question 5

Leverage is essential to a bank's profitability, but it also increases risk.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following elements of GDP were affected by the financial crisis and the lack of available credit?

Accepted Answer

A) Consumption and business investment only 
B) Consumption and government spending only 
C) Consumption, business investment, and government spending only 
D) Consumption, business investment, government spending, and imports/exports 
A) Consumption and business investment only 
B) Consumption and government spending only 
C) Consumption, business investment, and government spending only 
D) Consumption, business investment, government spending, and imports/exports

Question 7

In hindsight, mortgage-backed securities implied very limited risk because the underlying mortgages were spread across different geographic areas.

Accepted Answer

A) True 
 B)False

Question 8

A bubble is best defined as a(n)

Accepted Answer

A) increase in the price of an asset resulting from fundamental causes. 
B) increase in the price of an asset resulting from factors other than fundamental causes. 
C) decrease in the price of an asset resulting from fundamental causes. 
D) decrease in the price of an asset resulting from factors other than fundamental causes. 
A) increase in the price of an asset resulting from fundamental causes. 
B) increase in the price of an asset resulting from factors other than fundamental causes. 
C) decrease in the price of an asset resulting from fundamental causes. 
D) decrease in the price of an asset resulting from factors other than fundamental causes.

Question 9

As a result of the Great Recession, job growth did not resume until

Accepted Answer

A) September 2008. 
B) March 2009. 
C) September 2009. 
D) March 2010. 
A) September 2008. 
B) March 2009. 
C) September 2009. 
D) March 2010.

Question 10

The first signs of major financial problems associated with the financial sector and real estate investment appeared in 2009.

Accepted Answer

A) True 
 B)False

Question 11

Mortgage-backed securities became a significant issue because I.housing prices fell across all regions.
II)these securities were not as widely distributed as previously thought.

Accepted Answer

A) I only 
B) II only 
C) Both I and II 
D) Neither I nor II 
A) I only 
B) II only 
C) Both I and II 
D) Neither I nor II

Question 12

As a result of the Great Recession, most financial markets hit bottom around

Accepted Answer

A) September 2008. 
B) March 2009. 
C) September 2009. 
D) March 2010. 
A) September 2008. 
B) March 2009. 
C) September 2009. 
D) March 2010.

Question 13

A home mortgage is a particular type of loan used to buy a house where the house serves as the collateral for the mortgage.

Accepted Answer

A) True 
 B)False

Question 14

If a 10-year Treasury bond pays 3.1 percent and a 10-year corporate bond pays 7.4 percent, what is the interest rate spread on this particular corporate bond?

Accepted Answer

A) 4.3 percent 
B) 7.4 percent 
C) 10.5 percent 
D) 22.9 percent 
A) 4.3 percent 
B) 7.4 percent 
C) 10.5 percent 
D) 22.9 percent

Question 15

A mortgage-backed security (MBS) is a type of bond whose interest payments and principal repayments derive from the monthly mortgage payments of many households.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following was not a typical characteristic of subprime mortgages?

Accepted Answer

A) Low down payments 
B) Loans to borrowers with poor credit histories 
C) Limited incomes with which to make loan payments 
D) Fixed interest rates 
A) Low down payments 
B) Loans to borrowers with poor credit histories 
C) Limited incomes with which to make loan payments 
D) Fixed interest rates

Question 17

The intended use of TARP funds was to

Accepted Answer

A) support the FDIC. 
B) increase consumers' disposable income. 
C) fund "shovel-ready" projects. 
D) purchase unwanted securities. 
A) support the FDIC. 
B) increase consumers' disposable income. 
C) fund "shovel-ready" projects. 
D) purchase unwanted securities.

Question 18

Which of the following was not a lesson from the 2007-2009 financial crisis?

Accepted Answer

A) Financial regulations were too "light" prior to the crisis. 
B) Excessive complexity made the financial system more fragile and dangerous. 
C) Both monetary policy and fiscal policy are needed in order for the economy to recover. 
D) Regulatory failures were based primarily on poor job performance. 
A) Financial regulations were too "light" prior to the crisis. 
B) Excessive complexity made the financial system more fragile and dangerous. 
C) Both monetary policy and fiscal policy are needed in order for the economy to recover. 
D) Regulatory failures were based primarily on poor job performance.

Question 19

A bank is said to be recapitalized when some investor, private or government, provides new equity capital in return for partial ownership.

Accepted Answer

A) True 
 B)False

Question 20

Because the U.S.economy failed to snap back from a mild recession in 2001, the Fed pushed the federal funds rate down to 1 percent.What effect did this have on the economy?

Accepted Answer

When the Fed reduced the federal funds r

Exam 30: The Financial Crisis and the Great Recession

In response to the economic downturn, the federal government enacted a fiscal stimulus bill with funding in excess of $700 billion.

Both monetary policy and fiscal policy were used in response to the recession of 2007-2009.

Most economists feel that overly strict financial regulation from 2000 to 2006 contributed to the financial crisis of 2007-2009.

Which of the following was a lesson from the 2007-2009 financial crisis?

Leverage is essential to a bank's profitability, but it also increases risk.

Which of the following elements of GDP were affected by the financial crisis and the lack of available credit?

In hindsight, mortgage-backed securities implied very limited risk because the underlying mortgages were spread across different geographic areas.

A bubble is best defined as a(n)

As a result of the Great Recession, job growth did not resume until

The first signs of major financial problems associated with the financial sector and real estate investment appeared in 2009.

Mortgage-backed securities became a significant issue because I.housing prices fell across all regions. II)these securities were not as widely distributed as previously thought.

As a result of the Great Recession, most financial markets hit bottom around

A home mortgage is a particular type of loan used to buy a house where the house serves as the collateral for the mortgage.

If a 10-year Treasury bond pays 3.1 percent and a 10-year corporate bond pays 7.4 percent, what is the interest rate spread on this particular corporate bond?

A mortgage-backed security (MBS) is a type of bond whose interest payments and principal repayments derive from the monthly mortgage payments of many households.

Which of the following was not a typical characteristic of subprime mortgages?

The intended use of TARP funds was to

Which of the following was not a lesson from the 2007-2009 financial crisis?

A bank is said to be recapitalized when some investor, private or government, provides new equity capital in return for partial ownership.

Because the U.S.economy failed to snap back from a mild recession in 2001, the Fed pushed the federal funds rate down to 1 percent.What effect did this have on the economy?

What Is Economics

The Economony: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

Contemporary Issues in the Useconomy

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