Question 1

The Federal Reserve helped J.P.Morgan purchase Bear Stearns by agreeing to purchase some unwanted Bear Stearns' assets.

Accepted Answer

A) True 
 B)False

Question 2

Real economy took a sharp turn for the worse immediately after the bankruptcy filing by Lehman Brothers on September 15, 2008.

Accepted Answer

A) True 
 B)False

Question 3

An interest rate spread is the difference between an interest rate on a risky asset and the corresponding interest rate on a risk-free treasury security.

Accepted Answer

A) True 
 B)False

Question 4

If the buyer commits $100,000 of his or her own funds and borrows $900,000 to purchase $1 million in assets, then the leverage ratio is

Accepted Answer

A) 10 to 1. 
B) 25 to 1. 
C) 9 to 1. 
D) 5 to 1. 
A) 10 to 1. 
B) 25 to 1. 
C) 9 to 1. 
D) 5 to 1.

Question 5

In 2008, the Fed utilized expansionary monetary policy, which was made

Accepted Answer

A) more effective as banks held more excess reserves. 
B) less effective as banks held more excess reserves. 
C) more effective as banks held less excess reserves. 
D) less effective as banks held less excess reserves. 
A) more effective as banks held more excess reserves. 
B) less effective as banks held more excess reserves. 
C) more effective as banks held less excess reserves. 
D) less effective as banks held less excess reserves.

Question 6

What amount of money was appropriated by Congress for the Troubled Asset Relief Program?

Accepted Answer

A) $225 billion 
B) $252 billion 
C) $700 billion 
D) $787 billion 
A) $225 billion 
B) $252 billion 
C) $700 billion 
D) $787 billion

Question 7

What is the leverage implied by the bank balance sheet listed below? ​

Accepted Answer

A) 2-to-1 
B) 7-to-1 
C) 8-to-1 
D) 10-to-1 
A) 2-to-1 
B) 7-to-1 
C) 8-to-1 
D) 10-to-1

Question 8

Assuming that the reserve ratio is 10 percent, what amount of excess reserves are held by with the bank balance sheet listed below? ​

Accepted Answer

A) zero 
B) $240,000 
C) $280,000 
D) $320,000 
A) zero 
B) $240,000 
C) $280,000 
D) $320,000

Question 9

A company is insolvent when the value of its liabilities exceeds the value of its assets.

Accepted Answer

A) True 
 B)False

Question 10

What was the lowest federal funds rate target the Fed set in response to the financial crisis?

Accepted Answer

A) 0 percent 
B) 1.8 percent 
C) 2.0 percent 
D) 2.2 percent 
A) 0 percent 
B) 1.8 percent 
C) 2.0 percent 
D) 2.2 percent

Question 11

If the reserve ratio was 10 percent for the bank with the balance sheet listed below, then this bank is being ​

Accepted Answer

A) aggressive as indicated by a small amount of excess reserves. 
B) aggressive as indicated by a large amount of excess reserves. 
C) cautious as indicated by a small amount of excess reserves. 
D) cautious as indicated by a large amount of excess reserves. 
A) aggressive as indicated by a small amount of excess reserves. 
B) aggressive as indicated by a large amount of excess reserves. 
C) cautious as indicated by a small amount of excess reserves. 
D) cautious as indicated by a large amount of excess reserves.

Question 12

The increased level of excess reserves that many banks held in 2008 made traditional monetary policy less effective.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following arguments is not a valid argument against the effectiveness of the fiscal stimulus bill?

Accepted Answer

A) Employment continued to fall into early 2010. 
B) Without stimulus recessions come to an end naturally. 
C) State and local government spending increased. 
D) Monetary policy played a large role in stimulating the economy. 
A) Employment continued to fall into early 2010. 
B) Without stimulus recessions come to an end naturally. 
C) State and local government spending increased. 
D) Monetary policy played a large role in stimulating the economy.

Question 14

In 2008, interest rates on Treasury securities fell even though most other interest rates were rising.

Accepted Answer

A) True 
 B)False

Question 15

The central idea behind the Troubled Asset Relief Program was for the Treasury to sell mortgage-backed securities to interested investors, wait for prices to increase, and then buy these securities back for a profit.

Accepted Answer

A) True 
 B)False

Question 16

The 2009 fiscal stimulus bill represented approximately

Accepted Answer

A) 5.5 percent of GDP and was designed to close the expansionary gap. 
B) 5.5 percent of GDP and was designed to close the recessionary gap. 
C) 7.8 percent of GDP and was designed to close the expansionary gap. 
D) 7.8 percent of GDP and was designed to close the recessionary gap. 
A) 5.5 percent of GDP and was designed to close the expansionary gap. 
B) 5.5 percent of GDP and was designed to close the recessionary gap. 
C) 7.8 percent of GDP and was designed to close the expansionary gap. 
D) 7.8 percent of GDP and was designed to close the recessionary gap.

Question 17

Borrowed funds are used in financing every component of GDP.

Accepted Answer

A) True 
 B)False

Question 18

Assume that Sharon purchases $5,000 worth of a stock.To do so she uses $1,000 of her own money and borrows the remaining $4,000 at a 7.0 percent interest rate.If the stock's value decreases by 10 percent in one year and she has to sell the stock at that time, what is her rate of return?

Accepted Answer

A) −10 percent 
B) −50 percent 
C) −78 percent 
D) −156 percent 
A) −10 percent 
B) −50 percent 
C) −78 percent 
D) −156 percent

Question 19

As a result of Lehman's collapse, real GDP first began to fall in

Accepted Answer

A) the fourth quarter of 2007. 
B) the second quarter of 2008. 
C) the third quarter of 2008. 
D) the first quarter of 2009. 
A) the fourth quarter of 2007. 
B) the second quarter of 2008. 
C) the third quarter of 2008. 
D) the first quarter of 2009.

Question 20

Spending on newly constructed homes is part of the investment component of GDP.

Accepted Answer

A) True 
 B)False

Exam 30: The Financial Crisis and the Great Recession

The Federal Reserve helped J.P.Morgan purchase Bear Stearns by agreeing to purchase some unwanted Bear Stearns' assets.

Real economy took a sharp turn for the worse immediately after the bankruptcy filing by Lehman Brothers on September 15, 2008.

An interest rate spread is the difference between an interest rate on a risky asset and the corresponding interest rate on a risk-free treasury security.

If the buyer commits $100,000 of his or her own funds and borrows $900,000 to purchase $1 million in assets, then the leverage ratio is

In 2008, the Fed utilized expansionary monetary policy, which was made

What amount of money was appropriated by Congress for the Troubled Asset Relief Program?

What is the leverage implied by the bank balance sheet listed below? ​

Assuming that the reserve ratio is 10 percent, what amount of excess reserves are held by with the bank balance sheet listed below? ​

A company is insolvent when the value of its liabilities exceeds the value of its assets.

What was the lowest federal funds rate target the Fed set in response to the financial crisis?

If the reserve ratio was 10 percent for the bank with the balance sheet listed below, then this bank is being ​

The increased level of excess reserves that many banks held in 2008 made traditional monetary policy less effective.

Which of the following arguments is not a valid argument against the effectiveness of the fiscal stimulus bill?

In 2008, interest rates on Treasury securities fell even though most other interest rates were rising.

The central idea behind the Troubled Asset Relief Program was for the Treasury to sell mortgage-backed securities to interested investors, wait for prices to increase, and then buy these securities back for a profit.

The 2009 fiscal stimulus bill represented approximately

Borrowed funds are used in financing every component of GDP.

Assume that Sharon purchases $5,000 worth of a stock.To do so she uses $1,000 of her own money and borrows the remaining $4,000 at a 7.0 percent interest rate.If the stock's value decreases by 10 percent in one year and she has to sell the stock at that time, what is her rate of return?

As a result of Lehman's collapse, real GDP first began to fall in

Spending on newly constructed homes is part of the investment component of GDP.

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

Filters

What is the leverage implied by the bank balance sheet listed below?

Assuming that the reserve ratio is 10 percent, what amount of excess reserves are held by with the bank balance sheet listed below?

If the reserve ratio was 10 percent for the bank with the balance sheet listed below, then this bank is being