Question 1

Stage Two of a financial crisis in an emerging market 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 2

Factors that can lead to worsening conditions in financial markets include increasing interest rates and asset price booms.

Accepted Answer

A) True 
 B)False

Question 3

Contrast the stages of a financial crisis between an advanced economy and an emerging market economy.

Accepted Answer

A financial crisis in an advanced econom

Question 4

Which of the following factors led up to the Mexican financial crisis of 1994?

Accepted Answer

A) speculative attacks on the peso and a rise in actual and expected inflation 
B) a rise in domestic interest rates and a deterioration in bank balance sheets 
C) a rise in foreign interest rates and domestic stock market declines 
D) all of the above 
E) only B and C of the above 
A) speculative attacks on the peso and a rise in actual and expected inflation 
B) a rise in domestic interest rates and a deterioration in bank balance sheets 
C) a rise in foreign interest rates and domestic stock market declines 
D) all of the above 
E) only B and C of the above

Question 5

In an emerging market economy, a lending boom and crash are not inevitable outcomes of financial liberalization and globalization. Discuss when a boom and crash will occur, and how it can be avoided.

Accepted Answer

In an emerging market economy, a lending

Question 6

Discuss the difference in Stage Two of a financial crisis between an advanced economy and an emerging market economy.

Accepted Answer

Stage Two of a financial crisis in an ad

Question 7

Adverse selection and moral hazard problems increased in magnitude during the early years of the Great Depression as

Accepted Answer

A) stock prices declined to 10 percent of their levels in 1929. 
B) banks failed. 
C) the aggregate price level declined. 
D) a result of all of the above. 
E) a result of A and B of the above. 
A) stock prices declined to 10 percent of their levels in 1929. 
B) banks failed. 
C) the aggregate price level declined. 
D) a result of all of the above. 
E) a result of A and B of the above.

Question 8

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 9

During a bank panic, many banks fail in a very short time period.

Accepted Answer

A) True 
 B)False

Question 10

Because asset markets are relatively small in an emerging market, they play less of a prominent role in a financial crisis in those economies.

Accepted Answer

A) True 
 B)False

Question 11

Argentina's 2001-2002 financial crisis was precipitated by

Accepted Answer

A) a weak and poorly supervised banking system. 
B) a lending boom that fueled a stock market bubble. 
C) difficulty financing a large budget deficit. 
D) a decline in interest rates. 
A) a weak and poorly supervised banking system. 
B) a lending boom that fueled a stock market bubble. 
C) difficulty financing a large budget deficit. 
D) a decline in interest rates.

Question 12

The process of deleveraging refers to

Accepted Answer

A) cutbacks in lending by financial institutions. 
B) a reduction in debt owed by banks. 
C) both A and B. 
D) none of the above. 
A) cutbacks in lending by financial institutions. 
B) a reduction in debt owed by banks. 
C) both A and B. 
D) none of the above.

Question 13

What does the "twin crises" in an emerging market financial crisis refer to?

Accepted Answer

A) both the currency crisis and the financial crisis 
B) both the fiscal crisis and the banking crisis 
C) both the inflation crisis and the asset bubble crisis 
D) both the fiscal crisis and political crisis 
A) both the currency crisis and the financial crisis 
B) both the fiscal crisis and the banking crisis 
C) both the inflation crisis and the asset bubble crisis 
D) both the fiscal crisis and political crisis

Question 14

What is a credit boom?

Accepted Answer

A) an explosion in a credit cycle, which can increase or decrease lending in the short-run 
B) essentially a lending spree on the part of banks and other financial institutions 
C) when credit card receivables rise due to low initial interest rates 
D) the signal of the end of a credit spree, with credit contracting rapidly 
A) an explosion in a credit cycle, which can increase or decrease lending in the short-run 
B) essentially a lending spree on the part of banks and other financial institutions 
C) when credit card receivables rise due to low initial interest rates 
D) the signal of the end of a credit spree, with credit contracting rapidly

Question 15

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.

Exam 8: Why Do Financial Crises Occur and Why Are They so Damaging to the Economy

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

Factors that can lead to worsening conditions in financial markets include increasing interest rates and asset price booms.

Contrast the stages of a financial crisis between an advanced economy and an emerging market economy.

Which of the following factors led up to the Mexican financial crisis of 1994?

In an emerging market economy, a lending boom and crash are not inevitable outcomes of financial liberalization and globalization. Discuss when a boom and crash will occur, and how it can be avoided.

Discuss the difference in Stage Two of a financial crisis between an advanced economy and an emerging market economy.

Adverse selection and moral hazard problems increased in magnitude during the early years of the Great Depression as

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.

During a bank panic, many banks fail in a very short time period.

Because asset markets are relatively small in an emerging market, they play less of a prominent role in a financial crisis in those economies.

Argentina's 2001-2002 financial crisis was precipitated by

The process of deleveraging refers to

What does the "twin crises" in an emerging market financial crisis refer to?

What is a credit boom?

Financial crises

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

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.