Question 1

The sharp swing in core inflation in 2008-09 was due to:

Accepted Answer

A) movements in energy prices. 
B) the sharp decline in housing prices. 
C) There was no sharp swing in core inflation. 
D) rapid increases in wages. 
E) rapidly rising unemployment. 
A) movements in energy prices. 
B) the sharp decline in housing prices. 
C) There was no sharp swing in core inflation. 
D) rapid increases in wages. 
E) rapidly rising unemployment.

Question 2

The Great Recession began in __________ and ended in __________.

Accepted Answer

A) December 2007;June 2009 
B) December 2008;June 2010 
C) May 2008;March 2010 
D) June 2007;December 2009 
E) June 2007;June 2009 
A) December 2007;June 2009 
B) December 2008;June 2010 
C) May 2008;March 2010 
D) June 2007;December 2009 
E) June 2007;June 2009

Question 3

What is an indicator of the extent of risk in financial systems?

Accepted Answer

A) the difference between the unemployment rate and the natural rate of unemployment 
B) falling commodity prices 
C) the spread between the monthly LIBOR rate and U.S.T-bill yield 
D) the spread between inflation-indexed and nonindexed U.S.bonds 
E) the number of banks applying for federal assistance 
A) the difference between the unemployment rate and the natural rate of unemployment 
B) falling commodity prices 
C) the spread between the monthly LIBOR rate and U.S.T-bill yield 
D) the spread between inflation-indexed and nonindexed U.S.bonds 
E) the number of banks applying for federal assistance

Question 4

For the following questions use the information in Table 10.1,which shows real GDP and potential real GDP for the years 2001-2010.  
-According to the data in Table 10.1,about how much did short-run output fluctuations equal in 2001 and 2008,respectively?

Accepted Answer

A) -1.6%,1.1% 
B) 1.7%;-1.1% 
C) 101.6;147.2 
D) -184.9;147.2 
E) not enough information 
A) -1.6%,1.1% 
B) 1.7%;-1.1% 
C) 101.6;147.2 
D) -184.9;147.2 
E) not enough information

Question 5

Consider the hypothetical bank balance sheet below to answer the following questions.   
a.What is the bank's net worth?
b.If the reserve requirement is 5 percent,what is the amount of "excess reserves" held by this bank?
c.What is this bank's leverage ratio?
d.If the bank's investments fall by $1,000,what is the bank's equity? Leverage ratio?

Accepted Answer

a.Net worth = Assets - Liabilities = $11

Question 6

In the recent financial crisis,the banks' problems arose from:

Accepted Answer

A) bank runs. 
B) revaluation of loans. 
C) a rapid loss of reserves. 
D) the riskiness of thirty-year fixed mortgages. 
E) lending money in return for short-term debt. 
A) bank runs. 
B) revaluation of loans. 
C) a rapid loss of reserves. 
D) the riskiness of thirty-year fixed mortgages. 
E) lending money in return for short-term debt.

Question 7

According to The Economist,by 2006 __________ of new home loans were __________ loans.

Accepted Answer

A) one-half;ARM one-third 
B) one-fifth;subprime 
C) only 1 percent;traditional 30-year-fixed 
D) almost all;inflation-indexed 
E) three-fourths;subprime 
A) one-half;ARM one-third 
B) one-fifth;subprime 
C) only 1 percent;traditional 30-year-fixed 
D) almost all;inflation-indexed 
E) three-fourths;subprime

Question 8

In what year was the Federal Deposit Insurance Corporation set up?

Accepted Answer

A) 2007 
B) 1933 
C) 1945 
D) 1991 
E) 1983 
A) 2007 
B) 1933 
C) 1945 
D) 1991 
E) 1983

Question 9

__________ peaked at the end of __________.By February 2010,__________.

Accepted Answer

A) Total non-farm employment;2007;over 8 million jobs were lost 
B) The unemployment rate;2006;inflation was 0 percent 
C) Median weeks of unemployment;2007;the unemployment rate had fallen to 7 percent 
D) Aggregate weekly hours;2007;inflation was negative 
E) The inflation rate;2008;the unemployment rate had risen to 11 percent 
A) Total non-farm employment;2007;over 8 million jobs were lost 
B) The unemployment rate;2006;inflation was 0 percent 
C) Median weeks of unemployment;2007;the unemployment rate had fallen to 7 percent 
D) Aggregate weekly hours;2007;inflation was negative 
E) The inflation rate;2008;the unemployment rate had risen to 11 percent

Question 10

For the following questions use the information in the followingtable.  
-Given the information in Table 10.2,if reserve requirements are 3 percent and capital requirements are 10 percent the bank meets:

Accepted Answer

A) reserve requirements,but not capital requirements. 
B) neither reserve requirements nor capital requirements. 
C) both reserve and capital requirements. 
D) capital requirements,but not reserve requirements 
E) not enough information 
A) reserve requirements,but not capital requirements. 
B) neither reserve requirements nor capital requirements. 
C) both reserve and capital requirements. 
D) capital requirements,but not reserve requirements 
E) not enough information

Question 11

The Federal Deposit Insurance Corporation was established,in part,to:

Accepted Answer

A) prevent bank runs. 
B) make loans to insolvent banks. 
C) increase confidence in investment banks. 
D) eradicate bank risk altogether. 
E) underwrite consumer loans. 
A) prevent bank runs. 
B) make loans to insolvent banks. 
C) increase confidence in investment banks. 
D) eradicate bank risk altogether. 
E) underwrite consumer loans.

Question 12

In Table 10.2,Column A is bank __________ and Column B is bank __________.

Accepted Answer

A) assets;liabilities 
B) liabilities;assets 
C) on-balance sheet activity;off-balance sheet activity 
D) "shadow" activity;"open air" activity 
E) not enough information 
A) assets;liabilities 
B) liabilities;assets 
C) on-balance sheet activity;off-balance sheet activity 
D) "shadow" activity;"open air" activity 
E) not enough information

Question 13

For the following questions use the information in the followingtable.  
-Given the information in Table 10.2,if the value of this bank's investments decrease by $1,000,what is the bank's equity?

Accepted Answer

A) $1,000 
B) $3,900 
C) $3,100 
D) $2,400 
E) not enough information 
A) $1,000 
B) $3,900 
C) $3,100 
D) $2,400 
E) not enough information

Question 14

How does "securitization" reduce overall risk?

Accepted Answer

Securitization packages financial instru

Question 15

In contrast to the dot-com stock market bubble,the bursting of the housing bubble __________,implying __________.

Accepted Answer

A) affected almost every financial institution;risk was well-diversified 
B) affected a small number of investors;the risk was not well-diversified 
C) hurt every household;households paid too high an interest rate 
D) was attenuated by a quick response by the Fed;the Fed's policy was effective 
E) increased household expenditures;it had little effect on the macroeconomy 
A) affected almost every financial institution;risk was well-diversified 
B) affected a small number of investors;the risk was not well-diversified 
C) hurt every household;households paid too high an interest rate 
D) was attenuated by a quick response by the Fed;the Fed's policy was effective 
E) increased household expenditures;it had little effect on the macroeconomy

Question 16

A significant cause of the 2008 financial crisis was that financial institutions were __________.

Accepted Answer

A) unfunded 
B) over-leveraged 
C) already insolvent 
D) nationalized 
E) illiquid 
A) unfunded 
B) over-leveraged 
C) already insolvent 
D) nationalized 
E) illiquid

Question 17

What incentive did banks have to give large loans to households with relatively little income?

Accepted Answer

A) rapidly rising housing prices 
B) low interest rates 
C) high rates of inflation 
D) high unemployment rates 
E) government guarantees 
A) rapidly rising housing prices 
B) low interest rates 
C) high rates of inflation 
D) high unemployment rates 
E) government guarantees

Question 18

Which of the following financial institutions converted to bank holding companies in the financial collapse?

Accepted Answer

A) Wells Fargo 
B) Goldman Sachs 
C) Morgan Stanley 
D) Citicorp 
E) b and c 
A) Wells Fargo 
B) Goldman Sachs 
C) Morgan Stanley 
D) Citicorp 
E) b and c

Question 19

Securitization is defined as:

Accepted Answer

A) bolstering defense spending. 
B) making it more difficult to enter the United States illegally. 
C) creating incentives for firms to protect proprietary information. 
D) disallowing the use of collateral for loans. 
E) lumping large numbers of financial instruments together and selling pieces to different types of investors. 
A) bolstering defense spending. 
B) making it more difficult to enter the United States illegally. 
C) creating incentives for firms to protect proprietary information. 
D) disallowing the use of collateral for loans. 
E) lumping large numbers of financial instruments together and selling pieces to different types of investors.

Question 20

The average decline in GDP growth for all recession since 1950 is __________ percent,but for the Great Recession it was __________ percent.

Accepted Answer

A) -2.1;-6.1 
B) -0.4;-31.4 
C) -3.7;-1.7 
D) -1.7;-3.7 
E) 0;2.2 
A) -2.1;-6.1 
B) -0.4;-31.4 
C) -3.7;-1.7 
D) -1.7;-3.7 
E) 0;2.2

The sharp swing in core inflation in 2008-09 was due to:

The Great Recession began in and ended in .

What is an indicator of the extent of risk in financial systems?

For the following questions use the information in Table 10.1,which shows real GDP and potential real GDP for the years 2001-2010. -According to the data in Table 10.1,about how much did short-run output fluctuations equal in 2001 and 2008,respectively?

In the recent financial crisis,the banks' problems arose from:

According to The Economist,by 2006 of new home loans were loans.

In what year was the Federal Deposit Insurance Corporation set up?

peaked at the end of .By February 2010,__.

For the following questions use the information in the followingtable. -Given the information in Table 10.2,if reserve requirements are 3 percent and capital requirements are 10 percent the bank meets:

The Federal Deposit Insurance Corporation was established,in part,to:

In Table 10.2,Column A is bank and Column B is bank .

For the following questions use the information in the followingtable. -Given the information in Table 10.2,if the value of this bank's investments decrease by $1,000,what is the bank's equity?

How does "securitization" reduce overall risk?

In contrast to the dot-com stock market bubble,the bursting of the housing bubble ,implying .

A significant cause of the 2008 financial crisis was that financial institutions were __________.

What incentive did banks have to give large loans to households with relatively little income?

Which of the following financial institutions converted to bank holding companies in the financial collapse?

Securitization is defined as:

The average decline in GDP growth for all recession since 1950 is percent,but for the Great Recession it was percent.

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long- Run Economic Growth

A Model of Production

The Solow Growth Model

Growth and Ideas

The Labor Market,wages,and Unemployment

Inflation

An Introduction to the Short Run

The Is Curve

Monetary Policy and the Phillips Curve

Stabilization Policy and the Asad Framework

The Great Recession and the Short-Run Model

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

Exam 10: The Great Recession: a First Look

The sharp swing in core inflation in 2008-09 was due to:

The Great Recession began in __________ and ended in __________.

What is an indicator of the extent of risk in financial systems?

For the following questions use the information in Table 10.1,which shows real GDP and potential real GDP for the years 2001-2010. -According to the data in Table 10.1,about how much did short-run output fluctuations equal in 2001 and 2008,respectively?

In the recent financial crisis,the banks' problems arose from:

According to The Economist,by 2006 __________ of new home loans were __________ loans.

In what year was the Federal Deposit Insurance Corporation set up?

__________ peaked at the end of __________.By February 2010,__________.

For the following questions use the information in the followingtable. -Given the information in Table 10.2,if reserve requirements are 3 percent and capital requirements are 10 percent the bank meets:

The Federal Deposit Insurance Corporation was established,in part,to:

In Table 10.2,Column A is bank __________ and Column B is bank __________.

For the following questions use the information in the followingtable. -Given the information in Table 10.2,if the value of this bank's investments decrease by $1,000,what is the bank's equity?

How does "securitization" reduce overall risk?

In contrast to the dot-com stock market bubble,the bursting of the housing bubble __________,implying __________.

A significant cause of the 2008 financial crisis was that financial institutions were __________.

What incentive did banks have to give large loans to households with relatively little income?

Which of the following financial institutions converted to bank holding companies in the financial collapse?

Securitization is defined as:

The average decline in GDP growth for all recession since 1950 is __________ percent,but for the Great Recession it was __________ percent.

Introduction to Macroeconomics

Measuring the Macroeconomy

An Overview of Long- Run Economic Growth

A Model of Production

The Solow Growth Model

Growth and Ideas

The Labor Market,wages,and Unemployment

Inflation

An Introduction to the Short Run

The Is Curve

Monetary Policy and the Phillips Curve

Stabilization Policy and the Asad Framework

The Great Recession and the Short-Run Model

Consumption

Investment

The Government and the Macroeconomy

International Trade

Exchange Rates and International Finance

Parting Thoughts

Filters

The Great Recession began in and ended in .

According to The Economist,by 2006 of new home loans were loans.

peaked at the end of .By February 2010,__.

In Table 10.2,Column A is bank and Column B is bank .

In contrast to the dot-com stock market bubble,the bursting of the housing bubble ,implying .

The average decline in GDP growth for all recession since 1950 is percent,but for the Great Recession it was percent.