Question 1

Why was the shadow banking system important during the 2007-2009 U.S.financial crisis?

Accepted Answer

The shadow banking system played a cruci

Question 2

In Europe,Greece was the first nation to face a debt crisis.

Accepted Answer

A) True 
 B)False

Question 3

Approximately how large was the U.S.subprime mortgage market in 2007?

Accepted Answer

A)  $100 million 
B)  $100 billion 
C)  $500 billion 
D)  $1 trillion 
A)  $100 million 
B)  $100 billion 
C)  $500 billion 
D)  $1 trillion

Question 4

Most financial crises in the United States have begun with

Accepted Answer

A)  a steep stock market decline. 
B)  an increase in uncertainty resulting from the failure of a major firm. 
C)  a steep decline in interest rates. 
D)  all of the above. 
E)  only A and B of the above. 
A)  a steep stock market decline. 
B)  an increase in uncertainty resulting from the failure of a major firm. 
C)  a steep decline in interest rates. 
D)  all of the above. 
E)  only A and B of the above.

Question 5

The failure of Ohio Life Insurance and Trust in 1857 did not signal the start of a recession due to prompt actions by the Fed.

Accepted Answer

A) True 
 B)False

Question 6

Bank failures have been a feature of all U.S.financial crises from 1800 to 1944.

Accepted Answer

A) True 
 B)False

Question 7

In an advanced economy,a financial crisis can begin in several ways,including

Accepted Answer

A)  mismanagement of financial liberalization or innovation. 
B)  asset pricing booms and busts. 
C)  an increase in uncertainty caused by failure of financial institutions. 
D)  all of the above. 
A)  mismanagement of financial liberalization or innovation. 
B)  asset pricing booms and busts. 
C)  an increase in uncertainty caused by failure of financial institutions. 
D)  all of the above.

Question 8

During the 1800s,many U.S.financial crises were precipitated by an increase in ________,often originating in London.

Accepted Answer

A)  interest rates 
B)  housing prices 
C)  gasoline prices 
D)  heating oil prices 
A)  interest rates 
B)  housing prices 
C)  gasoline prices 
D)  heating oil prices

Question 9

When we refer to the shadow banking system,what are we talking about?

Accepted Answer

A)  Hedge funds, investment banks, and other nonbank financial firms that supply liquidity 
B)  The "underground" banking system used for illegal activities 
C)  The subsidiaries of depository institutions 
D)  None of the above 
A)  Hedge funds, investment banks, and other nonbank financial firms that supply liquidity 
B)  The "underground" banking system used for illegal activities 
C)  The subsidiaries of depository institutions 
D)  None of the above

Question 10

In addition to having a direct effect on increasing adverse selection problems,increases in interest rates also promote financial crises by ________ firms' and households' interest payments,thereby ________ their cash flow.

Accepted Answer

A)  increasing; increasing 
B)  increasing; decreasing 
C)  decreasing; increasing 
D)  decreasing; decreasing 
A)  increasing; increasing 
B)  increasing; decreasing 
C)  decreasing; increasing 
D)  decreasing; decreasing

Question 11

Explain the relationship between agency theory and a financial crisis.

Accepted Answer

The financial credit crash of 2007 and 2

Question 12

Describe the sequence of events in a financial crisis in an advanced economy and explain why they can cause economic activity to decline.

Accepted Answer

A financial crisis in an advanced econom

Question 13

Which of the following factors led up to the Greece debt crisis in 2009-2010?

Accepted Answer

A)  Speculative attacks on the euro and a rise in actual and expected inflation 
B)  A decline in tax revenues resulting from a contraction in economic activity 
C)  A double-digit budget deficit 
D)  All of the above 
E)  only B and C of the above 
A)  Speculative attacks on the euro and a rise in actual and expected inflation 
B)  A decline in tax revenues resulting from a contraction in economic activity 
C)  A double-digit budget deficit 
D)  All of the above 
E)  only B and C of the above

Question 14

Stage Two of a financial crisis in an advanced economy usually involves a ________ crisis.

Accepted Answer

A)  currency 
B)  stock market 
C)  banking 
D)  commodities 
A)  currency 
B)  stock market 
C)  banking 
D)  commodities

Question 15

What is a collateralized debt obligation?

Accepted Answer

A)  A tranche of an SPV that has been setup based on default risk 
B)  An agreement to exchange interest payments when one party defaults 
C)  A type of insurance against defaults 
D)  A contract between credit rating agencies 
A)  A tranche of an SPV that has been setup based on default risk 
B)  An agreement to exchange interest payments when one party defaults 
C)  A type of insurance against defaults 
D)  A contract between credit rating agencies

Question 16

A financial crisis occurs when information flows in financial markets experience a particularly large disruption.

Accepted Answer

A) True 
 B)False

Question 17

An unusual feature of the "Great Recession" in the U.S.from 2007-2009 was that the crisis did not spread to European nations.

Accepted Answer

A) True 
 B)False

Question 18

Financial crises

Accepted Answer

A)  cause failures of financial intermediaries and leave only securities markets to channel funds from savers to borrowers. 
B)  are a recent phenomenon that occur only in developing countries. 
C)  invariably lead to debt deflation. 
D)  all of the above. 
E)  none of the above. 
A)  cause failures of financial intermediaries and leave only securities markets to channel funds from savers to borrowers. 
B)  are a recent phenomenon that occur only in developing countries. 
C)  invariably lead to debt deflation. 
D)  all of the above. 
E)  none of the above.

Question 19

Describe how the European debt crisis evolved.

Accepted Answer

The European debt crisis had begun in th

Exam 8: Why Do Financial Crises Occur and

Why was the shadow banking system important during the 2007-2009 U.S.financial crisis?

In Europe,Greece was the first nation to face a debt crisis.

Approximately how large was the U.S.subprime mortgage market in 2007?

Most financial crises in the United States have begun with

The failure of Ohio Life Insurance and Trust in 1857 did not signal the start of a recession due to prompt actions by the Fed.

Bank failures have been a feature of all U.S.financial crises from 1800 to 1944.

In an advanced economy,a financial crisis can begin in several ways,including

During the 1800s,many U.S.financial crises were precipitated by an increase in ________,often originating in London.

When we refer to the shadow banking system,what are we talking about?

In addition to having a direct effect on increasing adverse selection problems,increases in interest rates also promote financial crises by ________ firms' and households' interest payments,thereby ________ their cash flow.

Explain the relationship between agency theory and a financial crisis.

Describe the sequence of events in a financial crisis in an advanced economy and explain why they can cause economic activity to decline.

Which of the following factors led up to the Greece debt crisis in 2009-2010?

Stage Two of a financial crisis in an advanced economy usually involves a ________ crisis.

What is a collateralized debt obligation?

A financial crisis occurs when information flows in financial markets experience a particularly large disruption.

An unusual feature of the "Great Recession" in the U.S.from 2007-2009 was that the crisis did not spread to European nations.

Financial crises

Describe how the European debt crisis evolved.

Why Study Financial Markets and Institutions?

Overview of the Financial System

What Do Interest Rates Mean and What Is Their Role in Valuation?

Why Do Interest Rates Change?

How Do Risk and Term Structure Affect Interest Rates?

Are Financial Markets Efficient?

Why Do Financial Institutions Exist?

Central Banks and the Federal Reserve System

Conduct of Monetary Policy: Tools, Goals, Strategy, and Tactics

The Money Markets

The Bond Market

The Stock Market

The Mortgage Markets

The Foreign Exchange Market

The International Financial System

Banking and the Management of Financial Institutions

Financial Regulation

Banking Industry: Structure and Competition

The Mutual Fund Industry

Insurance Companies and Pension Funds

Investment Banks, Security Brokers and Dealers, and Venture Capital Firms

Risk Management in Financial Institutions

Hedging with Financial Derivatives

Financial Crises In Emerging Market Economies

Savings Associations and Credit Unions

Finance Companies

Filters

In addition to having a direct effect on increasing adverse selection problems,increases in interest rates also promote financial crises by firms' and households' interest payments,thereby their cash flow.