Question 1

During the real estate boom of the early 2000s, some banks operated with leverage ratios in excess of 30-to-1.

Accepted Answer

A) True 
 B)False  True

Question 2

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 D

Question 3

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. B

Question 4

Expansionary monetary policy is essentially finished once the Fed reduces the federal funds rate to zero.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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 7

Assume that Michaela purchases $12,000 worth of a stock.To do so she uses $2,000 of her own money and borrows the remaining $10,000 at an 8.0% interest rate.If the stock's value increases by 20% in one year and she sells the stock at that time, what is her rate of return?

Accepted Answer

A)  13% 
B)  16% 
C)  20% 
D)  80% 
A)  13% 
B)  16% 
C)  20% 
D)  80%

Question 8

The monetary and fiscal stimulus response to the Great Recession resulted in an immediate increase in real GDP.

Accepted Answer

A) True 
 B)False

Question 9

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 10

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

Accepted Answer

A)  Regulatory failures were the result of weaknesses across the regulatory structure. 
B)  The financial system operated with too much leverage. 
C)  The business cycle no longer applies to economic analysis. 
D)  Monetary policy alone may not be sufficient to stabilize aggregate demand. 
A)  Regulatory failures were the result of weaknesses across the regulatory structure. 
B)  The financial system operated with too much leverage. 
C)  The business cycle no longer applies to economic analysis. 
D)  Monetary policy alone may not be sufficient to stabilize aggregate demand.

Question 11

The 2009 fiscal stimulus bill represented approximately

Accepted Answer

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

Question 12

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 13

If a 10-year Treasury bond pays 1.5% and a 10-year corporate bond pays 4.4%, then the spread on this particular corporate bond is 5.9%.

Accepted Answer

A) True 
 B)False

Question 14

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

Question 15

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 16

In hindsight, mortgage-backed securities implied very limited risk because the underlying mortgages were spread across different geographic areas.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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 19

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 20

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

Accepted Answer

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

Exam 31: The Financial Crisis and the Great Recession

During the real estate boom of the early 2000s, some banks operated with leverage ratios in excess of 30-to-1.

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

A bubble is best defined as

Expansionary monetary policy is essentially finished once the Fed reduces the federal funds rate to zero.

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

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

Assume that Michaela purchases $12,000 worth of a stock.To do so she uses $2,000 of her own money and borrows the remaining $10,000 at an 8.0% interest rate.If the stock's value increases by 20% in one year and she sells the stock at that time, what is her rate of return?

The monetary and fiscal stimulus response to the Great Recession resulted in an immediate increase in real GDP.

The intended use of TARP funds was to

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

The 2009 fiscal stimulus bill represented approximately

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

If a 10-year Treasury bond pays 1.5% and a 10-year corporate bond pays 4.4%, then the spread on this particular corporate bond is 5.9%.

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

The Lehman Brothers bankruptcy triggered a financial panic that featured

In hindsight, mortgage-backed securities implied very limited risk because the underlying mortgages were spread across different geographic areas.

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

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

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

What Is Economics?

The Economy: 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

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, 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

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