Question 1

In a bank run:

Accepted Answer

A) the bank has a surplus of deposits and must turn customers away. 
B) bank customers try to withdraw their deposits. 
C) the bank runs out of money to lend to customers. 
D) the bank runs out of profitable investments for the funds of its depositors. 
A) the bank has a surplus of deposits and must turn customers away. 
B) bank customers try to withdraw their deposits. 
C) the bank runs out of money to lend to customers. 
D) the bank runs out of profitable investments for the funds of its depositors.

Question 2

During the 2008 financial crisis, investors feared that Spain's government might default on its debt because:

Accepted Answer

A) it spent large amounts of money helping homeowners avoid foreclosure. 
B) it lent too much money to Greece. 
C) the government might have to spend large amounts of money to bail out Spanish banks. 
D) it was leaving the European Union. 
A) it spent large amounts of money helping homeowners avoid foreclosure. 
B) it lent too much money to Greece. 
C) the government might have to spend large amounts of money to bail out Spanish banks. 
D) it was leaving the European Union.

Question 3

The primary cause of the Spanish recession following the 2008 financial crisis was a:

Accepted Answer

A) stock market crash. 
B) housing bubble. 
C) public debt crisis. 
D) devaluation of Spain's currency, the peseta. 
A) stock market crash. 
B) housing bubble. 
C) public debt crisis. 
D) devaluation of Spain's currency, the peseta.

Question 4

When the economy is in a liquidity trap, consumers and businesses aren't willing to borrow and spend even though interest rates may be zero.

Accepted Answer

A) True 
 B)False

Question 5

Banking crises are:

Accepted Answer

A) not very harmful to the real economy, since money is neutral in the long run. 
B) typically followed by recessions. 
C) typically the beginning of long periods of economic growth. 
D) usually over with very quickly. 
A) not very harmful to the real economy, since money is neutral in the long run. 
B) typically followed by recessions. 
C) typically the beginning of long periods of economic growth. 
D) usually over with very quickly.

Question 6

In the early 1990s banking crises occurred in Finland, Sweden, and Japan because:

Accepted Answer

A) of real estate bubbles in each country. 
B) the central banks of these countries were prohibited from conducting monetary policy. 
C) the value of the euro fell to historically low levels. 
D) there were many runs on banks. 
A) of real estate bubbles in each country. 
B) the central banks of these countries were prohibited from conducting monetary policy. 
C) the value of the euro fell to historically low levels. 
D) there were many runs on banks.

Question 7

The Dodd-Frank bill affected derivatives by:

Accepted Answer

A) prohibiting them. 
B) requiring that the issuer guarantee 50% of the purchaser's investment. 
C) allowing them to be purchased and sold only by the Federal Reserve. 
D) requiring that they be traded in transparent markets. 
A) prohibiting them. 
B) requiring that the issuer guarantee 50% of the purchaser's investment. 
C) allowing them to be purchased and sold only by the Federal Reserve. 
D) requiring that they be traded in transparent markets.

Question 8

When troubled financial institutions are forced to sell assets quickly at a deep discount, this is a(n):

Accepted Answer

A) debt overhang. 
B) vicious cycle of deleveraging. 
C) maturity transformation. 
D) asset bubble. 
A) debt overhang. 
B) vicious cycle of deleveraging. 
C) maturity transformation. 
D) asset bubble.

Question 9

Banks:

Accepted Answer

A) reduce the opportunity cost of the trade-off between rate of return and liquidity. 
B) increase the opportunity cost of the trade-off between rate of return and liquidity. 
C) encourage people to hold more cash. 
D) reduce the amount of liquidity in the economy. 
A) reduce the opportunity cost of the trade-off between rate of return and liquidity. 
B) increase the opportunity cost of the trade-off between rate of return and liquidity. 
C) encourage people to hold more cash. 
D) reduce the amount of liquidity in the economy.

Question 10

As a consequence of the 2008 financial crisis, the economies of the United States and the European Union shrank by more than 25%.

Accepted Answer

A) True 
 B)False

Question 11

When the Fed purchases short-term government securities from banks, the primary effect on excess reserves is that they:

Accepted Answer

A) decrease. 
B) increase. 
C) remain constant. 
D) fluctuate randomly. 
A) decrease. 
B) increase. 
C) remain constant. 
D) fluctuate randomly.

Question 12

A repo is a:

Accepted Answer

A) share of stock in a depository bank. 
B) share of stock in a shadow bank. 
C) long-term loan. 
D) short-term loan. 
A) share of stock in a depository bank. 
B) share of stock in a shadow bank. 
C) long-term loan. 
D) short-term loan.

Question 13

A sudden and widespread disruption of financial institutions and markets is known as:

Accepted Answer

A) a liquidity trap. 
B) the fallacy of composition. 
C) a financial panic. 
D) stagflation. 
A) a liquidity trap. 
B) the fallacy of composition. 
C) a financial panic. 
D) stagflation.

Question 14

Which of the following is TRUE of the Federal Reserve's response to the banking crises of the 1930s and 2008?

Accepted Answer

A) In both crises, the Fed acted aggressively as a lender of last resort and to guarantee liabilities of troubled banks. 
B) In both crises, the Fed failed to use its power to act as a lender of last resort or to guarantee liabilities of troubled banks. 
C) In the 1930s the Fed acted aggressively as a lender of last resort and to guarantee liabilities of troubled banks, but it did not act in 2008. 
D) In 2008 the Fed acted aggressively as a lender of last resort and to guarantee liabilities of troubled banks, but it did not act in the 1930s. 
A) In both crises, the Fed acted aggressively as a lender of last resort and to guarantee liabilities of troubled banks. 
B) In both crises, the Fed failed to use its power to act as a lender of last resort or to guarantee liabilities of troubled banks. 
C) In the 1930s the Fed acted aggressively as a lender of last resort and to guarantee liabilities of troubled banks, but it did not act in 2008. 
D) In 2008 the Fed acted aggressively as a lender of last resort and to guarantee liabilities of troubled banks, but it did not act in the 1930s.

In a bank run:

During the 2008 financial crisis, investors feared that Spain's government might default on its debt because:

The primary cause of the Spanish recession following the 2008 financial crisis was a:

When the economy is in a liquidity trap, consumers and businesses aren't willing to borrow and spend even though interest rates may be zero.

Banking crises are:

In the early 1990s banking crises occurred in Finland, Sweden, and Japan because:

The Dodd-Frank bill affected derivatives by:

When troubled financial institutions are forced to sell assets quickly at a deep discount, this is a(n):

Banks:

As a consequence of the 2008 financial crisis, the economies of the United States and the European Union shrank by more than 25%.

When the Fed purchases short-term government securities from banks, the primary effect on excess reserves is that they:

A repo is a:

A sudden and widespread disruption of financial institutions and markets is known as:

Which of the following is TRUE of the Federal Reserve's response to the banking crises of the 1930s and 2008?

First Principles

Economic Models

Supply and Demand

International Trade 5

Macroeconomics: the Big Picture

Gdp and Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Fiscal Policy Appendix Taxes and the Multiplier

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Events and Ideas

Open-Economy Macroeconomics

Graphs in Economics

toward a Fuller Understanding of Present Value

Filters

Exam 17: Crises and Consequences

In a bank run:

During the 2008 financial crisis, investors feared that Spain's government might default on its debt because:

The primary cause of the Spanish recession following the 2008 financial crisis was a:

When the economy is in a liquidity trap, consumers and businesses aren't willing to borrow and spend even though interest rates may be zero.

Banking crises are:

In the early 1990s banking crises occurred in Finland, Sweden, and Japan because:

The Dodd-Frank bill affected derivatives by:

When troubled financial institutions are forced to sell assets quickly at a deep discount, this is a(n):

Banks:

As a consequence of the 2008 financial crisis, the economies of the United States and the European Union shrank by more than 25%.

When the Fed purchases short-term government securities from banks, the primary effect on excess reserves is that they:

A repo is a:

A sudden and widespread disruption of financial institutions and markets is known as:

Which of the following is TRUE of the Federal Reserve's response to the banking crises of the 1930s and 2008?

First Principles

Economic Models

Supply and Demand

International Trade 5

Macroeconomics: the Big Picture

Gdp and Cpi: Tracking the Macroeconomy

Unemployment and Inflation

Long-Run Economic Growth

Savings, Investment Spending, and the Financial System

Fiscal Policy Appendix Taxes and the Multiplier

Money, Banking, and the Federal Reserve System

Monetary Policy

Inflation, Disinflation, and Deflation

Events and Ideas

Open-Economy Macroeconomics

Graphs in Economics

toward a Fuller Understanding of Present Value

Filters