Question 1

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 2

It would be impossible to have an unlevered bank.

Accepted Answer

A) True 
 B)False

Question 3

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 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

Name some important lessons learned from the financial crisis.

Accepted Answer

1. Most observers believe that financial

Question 6

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 7

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 8

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

Accepted Answer

A) True 
 B)False

Question 9

A bank would be considered insolvent when the value of its liabilities exceed its

Accepted Answer

A)  assets. 
B)  required reserves. 
C)  actual reserves. 
D)  net worth. 
A)  assets. 
B)  required reserves. 
C)  actual reserves. 
D)  net worth.

Question 10

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 11

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 12

What amount of money was appropriated by Congress for fiscal stimulus bill of 2009?

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 13

The Lehman Brothers bankruptcy triggered a financial panic that featured a(n)

Accepted Answer

A)  increase in Treasury interest rates and an increase in most other interest rates. 
B)  increase in Treasury interest rates and a decrease in most other interest rates. 
C)  decrease in Treasury interest rates and an increase in most other interest rates. 
D)  decrease in Treasury interest rates and a decrease in most other interest rates. 
A)  increase in Treasury interest rates and an increase in most other interest rates. 
B)  increase in Treasury interest rates and a decrease in most other interest rates. 
C)  decrease in Treasury interest rates and an increase in most other interest rates. 
D)  decrease in Treasury interest rates and a decrease in most other interest rates.

Question 14

In 2007, which of the following U.S. firms showed the first indication of significant problems in the financial sector?

Accepted Answer

A)  AIG 
B)  Bear Stearns 
C)  J.P. Morgan Chase 
D)  Lehman Brothers 
A)  AIG 
B)  Bear Stearns 
C)  J.P. Morgan Chase 
D)  Lehman Brothers

Question 15

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

Accepted Answer

A)  10-to-1 
B)  12-to-1 
C)  20-to-1 
D)  21-to-1 
A)  10-to-1 
B)  12-to-1 
C)  20-to-1 
D)  21-to-1

Question 16

The recession of 2007-2009 was the most severe economic downturn in the United States since the

Accepted Answer

A)  1930s. 
B)  1950s. 
C)  1970s. 
D)  1980s. 
A)  1930s. 
B)  1950s. 
C)  1970s. 
D)  1980s.

Question 17

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

Question 18

Which of the following are accurate arguments suggesting that the fiscal stimulus did work?

Accepted Answer

A)  Real GDP growth moved from negative to positive in 2009. 
B)  Employment increased in 2009. 
C)  The economy has natural self-correcting mechanisms. 
D)  The return on bailout assets reduced the deficit. 
A)  Real GDP growth moved from negative to positive in 2009. 
B)  Employment increased in 2009. 
C)  The economy has natural self-correcting mechanisms. 
D)  The return on bailout assets reduced the deficit.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

If a five-year Treasury bond pays an interest of 2.5 percent and a five-year corporate bond pays an interest rate of 4.5 percent, then the interest rate spread on the corporate bond equals 2 percent.

Accepted Answer

A) True 
 B)False

Exam 30: The Financial Crisis and the Great Recession

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

It would be impossible to have an unlevered bank.

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

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

Name some important lessons learned from the financial crisis.

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?

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

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

A bank would be considered insolvent when the value of its liabilities exceed its

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

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

What amount of money was appropriated by Congress for fiscal stimulus bill of 2009?

The Lehman Brothers bankruptcy triggered a financial panic that featured a(n)

In 2007, which of the following U.S. firms showed the first indication of significant problems in the financial sector?

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

The recession of 2007-2009 was the most severe economic downturn in the United States since the

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

Which of the following are accurate arguments suggesting that the fiscal stimulus did work?

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

If a five-year Treasury bond pays an interest of 2.5 percent and a five-year corporate bond pays an interest rate of 4.5 percent, then the interest rate spread on the corporate bond equals 2 percent.

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

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 Us Economy

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