Question 1

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 2

The Lehman Brothers bankruptcy triggered a financial panic that featured

Accepted Answer

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

Question 3

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% interest rate.If the stock's value decreases by 10% in one year and she has to sell the stock at that time,what is her rate of return?

Accepted Answer

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

Question 4

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 5

Despite both monetary and fiscal policy actions,real GDP declined at an annualized rate of 6% during the last quarter of 2008 and the first quarter of 2009.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Subprime mortgages frequently featured small or zero down payments.

Accepted Answer

A) True 
 B)False

Question 8

The Fed's loan that effectively nationalized AIG was approved by Congress.

Accepted Answer

A) True 
 B)False

Question 9

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 10

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

Accepted Answer

A) True 
 B)False

Question 11

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 12

Mortgage-backed securities became a significant issue because

Accepted Answer

A)  I above only 
B)  II above only 
C)  both I and II above 
D)  neither I nor II above 
A)  I above only 
B)  II above only 
C)  both I and II above 
D)  neither I nor II above

Question 13

During the financial crisis associated with the Great Recession,the interest rate spread between Treasury bills and bank-to-bank lending increased substantially.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following are not valid arguments 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 15

A bubble is best defined as

Accepted Answer

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

Question 16

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 17

During the 2000 to 2006 time period,housing prices increased but only to a limited degree.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Which of the following was not a factor that contributed to the subprime mortgage crisis?

Accepted Answer

A)  f security derived from FDIC insurance on mortgage loans 
B)  lower down payments 
C)  households devoting 25% or more of their income to mortgage payments 
D)  lending to households with adverse credit ratings 
A)  f security derived from FDIC insurance on mortgage loans 
B)  lower down payments 
C)  households devoting 25% or more of their income to mortgage payments 
D)  lending to households with adverse credit ratings

Question 20

A larger interest rate spread in 2003-2006 is one of the factors that led to the recession of 2007.

Accepted Answer

A) True 
 B)False

The intended use of TARP funds was to

The Lehman Brothers bankruptcy triggered a financial panic that featured

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% interest rate.If the stock's value decreases by 10% in one year and she has to sell the stock at that time,what is her rate of return?

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

Despite both monetary and fiscal policy actions,real GDP declined at an annualized rate of 6% during the last quarter of 2008 and the first quarter of 2009.

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

Subprime mortgages frequently featured small or zero down payments.

The Fed's loan that effectively nationalized AIG was approved by Congress.

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

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

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.

Mortgage-backed securities became a significant issue because

During the financial crisis associated with the Great Recession,the interest rate spread between Treasury bills and bank-to-bank lending increased substantially.

Which of the following are not valid arguments against the effectiveness of the fiscal stimulus bill?

A bubble is best defined as

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

During the 2000 to 2006 time period,housing prices increased but only to a limited degree.

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

Which of the following was not a factor that contributed to the subprime mortgage crisis?

A larger interest rate spread in 2003-2006 is one of the factors that led to the recession of 2007.

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

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Exam 14: The Financial Crisis and the Great Recession

The intended use of TARP funds was to

The Lehman Brothers bankruptcy triggered a financial panic that featured

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% interest rate.If the stock's value decreases by 10% in one year and she has to sell the stock at that time,what is her rate of return?

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

Despite both monetary and fiscal policy actions,real GDP declined at an annualized rate of 6% during the last quarter of 2008 and the first quarter of 2009.

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

Subprime mortgages frequently featured small or zero down payments.

The Fed's loan that effectively nationalized AIG was approved by Congress.

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

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

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.

Mortgage-backed securities became a significant issue because

During the financial crisis associated with the Great Recession,the interest rate spread between Treasury bills and bank-to-bank lending increased substantially.

Which of the following are not valid arguments against the effectiveness of the fiscal stimulus bill?

A bubble is best defined as

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

During the 2000 to 2006 time period,housing prices increased but only to a limited degree.

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

Which of the following was not a factor that contributed to the subprime mortgage crisis?

A larger interest rate spread in 2003-2006 is one of the factors that led to the recession of 2007.

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

Filters