Question 1

All of the following EXCEPT one would have a strong propensity to initiate a financial crisis. Which is the exception?

Accepted Answer

A)  increases in uncertainty 
B)  increases in interest rates 
C)  balance sheet deterioration 
D)  exchange rate appreciation 
A)  increases in uncertainty 
B)  increases in interest rates 
C)  balance sheet deterioration 
D)  exchange rate appreciation

Question 2

CMO stands for credit managed offering.

Accepted Answer

A) True 
 B)False

Question 3

The financial panic of 2007-2009 was a systemic crisis.

Accepted Answer

A) True 
 B)False

Question 4

Explain why an increase in stock prices is not necessarily a bubble.

Accepted Answer

An increase in stock

Question 5

The primary argument for bailouts is they help crises to remain systemic.

Accepted Answer

A) True 
 B)False

Question 6

IBs perform _______ conventional banks during financial crises.

Accepted Answer

A)  better than 
B)  worse than 
C)  the same as 
D)  none of the above 
A)  better than 
B)  worse than 
C)  the same as 
D)  none of the above

Question 7

A corporate bond is an example of a securitized asset.

Accepted Answer

A) True 
 B)False

Question 8

Which government action is usually tried first in a financial crisis?

Accepted Answer

A)  changing the reserve requirement 
B)  bailout 
C)  lender of last resort 
D)  none of the above 
A)  changing the reserve requirement 
B)  bailout 
C)  lender of last resort 
D)  none of the above

Question 9

Was the Black Friday stock market crash in 1987 a systemic crisis? Why or why not?

Accepted Answer

It was a systemic cr

Question 10

A lender of last resort is always a government agency.

Accepted Answer

A) True 
 B)False

Question 11

Bailouts often involve taxpayer money.

Accepted Answer

A) True 
 B)False

Question 12

The popping of the dot-com bubble in 2000 turned into a systemic crisis.

Accepted Answer

A) True 
 B)False

Question 13

MBS stands for mortgage backed securities.

Accepted Answer

A) True 
 B)False

Question 14

The housing bubble leading up to the financial crisis of 2007-2009 was exacerbated by

Accepted Answer

A)  easy monetary policy. 
B)  Fannie and Freddie's purchase of MBS. 
C)  loose private sector lending standards. 
D)  all of the above. 
A)  easy monetary policy. 
B)  Fannie and Freddie's purchase of MBS. 
C)  loose private sector lending standards. 
D)  all of the above.

Question 15

Islamic banks invest in assets that do not play explicit interest.

Accepted Answer

A) True 
 B)False

Question 16

During the 2007-2009 financial crisis, the government engaged in bailouts but did not act as a lender of last resort.

Accepted Answer

A) True 
 B)False

Question 17

Samantha and Jamaal both invest in a stock whose price goes from $100 to $60 after one year and $40 the next. Samantha borrowed 20% of the money to invest while Jamaal borrowed none. Find their effective rates of return on the initial price ignoring the cost of borrowing.

Accepted Answer

Jamaal's rate of return is -40

Question 18

Islamic banks perform worse than conventional ones during financial crises.

Accepted Answer

A) True 
 B)False

Question 19

Bailouts are intended to

Accepted Answer

A)  increase the liquidity in financial institutions. 
B)  prevent insolvencies. 
C)  restrain money supply growth. 
D)  all of the above. 
A)  increase the liquidity in financial institutions. 
B)  prevent insolvencies. 
C)  restrain money supply growth. 
D)  all of the above.

Question 20

The collapse of the housing bubbles ends when all homeowners are "under water."

Accepted Answer

A) True 
 B)False

Exam 13: Financial Crises: Causes and Consequences

All of the following EXCEPT one would have a strong propensity to initiate a financial crisis. Which is the exception?

CMO stands for credit managed offering.

The financial panic of 2007-2009 was a systemic crisis.

Explain why an increase in stock prices is not necessarily a bubble.

The primary argument for bailouts is they help crises to remain systemic.

IBs perform _______ conventional banks during financial crises.

A corporate bond is an example of a securitized asset.

Which government action is usually tried first in a financial crisis?

Was the Black Friday stock market crash in 1987 a systemic crisis? Why or why not?

A lender of last resort is always a government agency.

Bailouts often involve taxpayer money.

The popping of the dot-com bubble in 2000 turned into a systemic crisis.

MBS stands for mortgage backed securities.

The housing bubble leading up to the financial crisis of 2007-2009 was exacerbated by

Islamic banks invest in assets that do not play explicit interest.

During the 2007-2009 financial crisis, the government engaged in bailouts but did not act as a lender of last resort.

Samantha and Jamaal both invest in a stock whose price goes from $100 to $60 after one year and $40 the next. Samantha borrowed 20% of the money to invest while Jamaal borrowed none. Find their effective rates of return on the initial price ignoring the cost of borrowing.

Islamic banks perform worse than conventional ones during financial crises.

Bailouts are intended to

The collapse of the housing bubbles ends when all homeowners are "under water."

The Financial System

Money

Interest Rates

The Economics of Interest-Rate Fluctuations

The Economics of Interest-Rate Spreads and Yield Curves

Rational Expectations, Efficient Markets, and the Valuation of Corporate Equities

Financial Structure, Transaction Costs, and Asymmetric Information

Bank Management

Innovation and Structure in Banking and Finance

The Economics of Financial Regulation

Financial Derivatives

Central Bank Form and Function

The Money Supply Process and the Money Multipliers

Monetary Policy Tools

Monetary Policy Targets and Goals

Foreign Exchange

International Monetary Regimes

Money Demand

Is-Lm

Is-Lm in Action

Aggregate Supply and Demand and the Growth Diamond

Monetary Policy Transmission Mechanisms

Inflation and Money

Rational Expectations Redux: Monetary Policy Implications

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