Question 1

What are the two most common reasons for a sovereign debt crisis?

Accepted Answer

Chronic government budget deficits that eventually result in the interest payments required on government bonds taking up an unsustainably large fraction of government spending,or a severe recession that increases government spending and reduces tax revenues,resulting in soaring budget deficits.

Question 2

Negotiable certificates of deposit differ from demand deposits in that they

Accepted Answer

A)  are not subject to early withdrawal penalties. 
B)  may be bought and sold in the secondary market. 
C)  generally have lower interest rates. 
D)  are not subject to state and local income taxes. 
A)  are not subject to early withdrawal penalties. 
B)  may be bought and sold in the secondary market. 
C)  generally have lower interest rates. 
D)  are not subject to state and local income taxes. B

Question 3

Many economists believe

Accepted Answer

A)  the Fed could have reduced the severity of the Great Depression by raising interest rates. 
B)  the Fed could have reduced the severity of the Great Depression by encouraging banks to make fewer loans to insolvent businesses. 
C)  bank failures increased the severity of the Great Depression. 
D)  the severity of the Great Depression and the policies of the Fed were unrelated. 
A)  the Fed could have reduced the severity of the Great Depression by raising interest rates. 
B)  the Fed could have reduced the severity of the Great Depression by encouraging banks to make fewer loans to insolvent businesses. 
C)  bank failures increased the severity of the Great Depression. 
D)  the severity of the Great Depression and the policies of the Fed were unrelated. C

Question 4

Banks with which type of loans were most likely to fail during the early 1930s?

Accepted Answer

A)  mortgage loans 
B)  agricultural loans 
C)  commercial real estate loans 
D)  international loans 
A)  mortgage loans 
B)  agricultural loans 
C)  commercial real estate loans 
D)  international loans

Question 5

The usual response of the banking system to new government regulations is

Accepted Answer

A)  evasion through whatever means are necessary. 
B)  strict compliance. 
C)  an attempt to circumvent the regulations through financial innovation. 
D)  bankruptcy. 
A)  evasion through whatever means are necessary. 
B)  strict compliance. 
C)  an attempt to circumvent the regulations through financial innovation. 
D)  bankruptcy.

Question 6

Research by Reinhart and Rogoff indicate that most of the increase in national debt as a result of a financial crisis is due to

Accepted Answer

A)  government bail outs of financial institutions. 
B)  increase spending on social welfare programs. 
C)  government stimulus programs. 
D)  sharp declines in tax revenues. 
A)  government bail outs of financial institutions. 
B)  increase spending on social welfare programs. 
C)  government stimulus programs. 
D)  sharp declines in tax revenues.

Question 7

Which of the following occurred following the failure of the Bank of the United States in 1930?

Accepted Answer

A)  Interest rates on low-grade corporate bonds rose relative to high-rated corporate bonds. 
B)  Other banks in New York City suffered liquidity problems. 
C)  A bank panic ensued within days. 
D)  The stock market crashed. 
A)  Interest rates on low-grade corporate bonds rose relative to high-rated corporate bonds. 
B)  Other banks in New York City suffered liquidity problems. 
C)  A bank panic ensued within days. 
D)  The stock market crashed.

Question 8

How does the relationship between housing prices and rental rates provide evidence for or against the existence of a housing bubble?

Accepted Answer

The fundamental value of a house should

Question 9

Banks have a maturity mismatch since

Accepted Answer

A)  they borrow long term, but lend short term. 
B)  they borrow short term, but lend long term. 
C)  some of their loans are short term while others are long term. 
D)  some of their borrowings are short term while others are long term. 
A)  they borrow long term, but lend short term. 
B)  they borrow short term, but lend long term. 
C)  some of their loans are short term while others are long term. 
D)  some of their borrowings are short term while others are long term.

Question 10

What are the primary reasons for and against a policy of "too big to fail."

Accepted Answer

The major argument in favor of such a po

Question 11

Who was the effectively in charge of the Fed during the early 1930s?

Accepted Answer

A)  Secretary of Treasury 
B)  Head of the Federal Reserve bank of New York 
C)  Comptroller of the Currency 
D)  no one 
A)  Secretary of Treasury 
B)  Head of the Federal Reserve bank of New York 
C)  Comptroller of the Currency 
D)  no one

Question 12

In what ways did the stock market crash of 1929 increase the severity of the downturn?

Accepted Answer

It reduced household wealth.It

Question 13

What are the four explanations given as to why the Fed did not intervene to stabilize the banking system during the Great Depression?

Accepted Answer

First,no one was in charge.Second,the Fe

Question 14

In what year did the economy return to normal conditions following the Great Depression?

Accepted Answer

A)  1933 
B)  1937 
C)  1941 
D)  1945 
A)  1933 
B)  1937 
C)  1941 
D)  1945

Question 15

The first stage in the regulatory process is

Accepted Answer

A)  a crisis. 
B)  response by the financial system. 
C)  regulation. 
D)  regulatory response. 
A)  a crisis. 
B)  response by the financial system. 
C)  regulation. 
D)  regulatory response.

Question 16

Describe the debt-deflation process.

Accepted Answer

As banks are forced to sell assets,the p

Question 17

Most of the TARP funds were used to

Accepted Answer

A)  fund a stimulus package. 
B)  pay for losses incurred by Fannie Mae and Freddie Mac. 
C)  finance the operations of the Federal Reserve. 
D)  make direct purchases of preferred stock in banks to increase their capital. 
A)  fund a stimulus package. 
B)  pay for losses incurred by Fannie Mae and Freddie Mac. 
C)  finance the operations of the Federal Reserve. 
D)  make direct purchases of preferred stock in banks to increase their capital.

Question 18

Negotiable order of withdrawal accounts

Accepted Answer

A)  are available only to large depositors. 
B)  are like checking accounts, but may not legally pay interest. 
C)  first appeared in New England during the early 1970s. 
D)  were declared illegal in the Depository Institution Deregulation and Monetary Control Act of 1980. 
A)  are available only to large depositors. 
B)  are like checking accounts, but may not legally pay interest. 
C)  first appeared in New England during the early 1970s. 
D)  were declared illegal in the Depository Institution Deregulation and Monetary Control Act of 1980.

Question 19

What other markets were affected by the decline in the housing market beginning in 2006? Briefly explain why.

Accepted Answer

Other markets affected include

Question 20

NOW accounts were developed in order to

Accepted Answer

A)  circumvent Regulation Q. 
B)  provide banks with a checkable deposit on which they did not have to pay interest. 
C)  provide banks with a liquid, interest-earning asset. 
D)  provide banks with a means of earning interest on the funds in their reserve accounts with the Fed. 
A)  circumvent Regulation Q. 
B)  provide banks with a checkable deposit on which they did not have to pay interest. 
C)  provide banks with a liquid, interest-earning asset. 
D)  provide banks with a means of earning interest on the funds in their reserve accounts with the Fed.

What are the two most common reasons for a sovereign debt crisis?

Negotiable certificates of deposit differ from demand deposits in that they

Many economists believe

Banks with which type of loans were most likely to fail during the early 1930s?

The usual response of the banking system to new government regulations is

Research by Reinhart and Rogoff indicate that most of the increase in national debt as a result of a financial crisis is due to

Which of the following occurred following the failure of the Bank of the United States in 1930?

How does the relationship between housing prices and rental rates provide evidence for or against the existence of a housing bubble?

Banks have a maturity mismatch since

What are the primary reasons for and against a policy of "too big to fail."

Who was the effectively in charge of the Fed during the early 1930s?

In what ways did the stock market crash of 1929 increase the severity of the downturn?

What are the four explanations given as to why the Fed did not intervene to stabilize the banking system during the Great Depression?

In what year did the economy return to normal conditions following the Great Depression?

The first stage in the regulatory process is

Describe the debt-deflation process.

Most of the TARP funds were used to

Negotiable order of withdrawal accounts

What other markets were affected by the decline in the housing market beginning in 2006? Briefly explain why.

NOW accounts were developed in order to

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, mutual Funds, hedge Funds, and the Shadow Banking System

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I: the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters

Exam 12: Financial Crises and Financial Regulation

What are the two most common reasons for a sovereign debt crisis?

Negotiable certificates of deposit differ from demand deposits in that they

Many economists believe

Banks with which type of loans were most likely to fail during the early 1930s?

The usual response of the banking system to new government regulations is

Research by Reinhart and Rogoff indicate that most of the increase in national debt as a result of a financial crisis is due to

Which of the following occurred following the failure of the Bank of the United States in 1930?

How does the relationship between housing prices and rental rates provide evidence for or against the existence of a housing bubble?

Banks have a maturity mismatch since

What are the primary reasons for and against a policy of "too big to fail."

Who was the effectively in charge of the Fed during the early 1930s?

In what ways did the stock market crash of 1929 increase the severity of the downturn?

What are the four explanations given as to why the Fed did not intervene to stabilize the banking system during the Great Depression?

In what year did the economy return to normal conditions following the Great Depression?

The first stage in the regulatory process is

Describe the debt-deflation process.

Most of the TARP funds were used to

Negotiable order of withdrawal accounts

What other markets were affected by the decline in the housing market beginning in 2006? Briefly explain why.

NOW accounts were developed in order to

Introducing Money and the Financial System

Money and the Payments System

Interest Rates and Rates of Return

Determining Interest Rates

The Risk Structure and Term Structure of Interest Rates

The Stock Market, information, and Financial Market Efficiency

Derivatives and Derivative Markets

The Market for Foreign Exchange

Transactions Costs, asymmetric Information, and the Structure of the Financial System

The Economics of Banking

Investment Banks, mutual Funds, hedge Funds, and the Shadow Banking System

The Federal Reserve and Central Banking

The Federal Reserves Balance Sheet and the Money Supply Process

Monetary Policy

The International Financial System and Monetary Policy

Monetary Theory I: the Aggregate Demand and Aggregate Supply Model

Monetary Theory Ii: the Is-Mp Model

Filters