Question 1

A repo is a long-term loan.

Accepted Answer

A) True 
 B)False

Question 2

Before the financial crisis in 2008 shadow banks:

Accepted Answer

A) were outside of the lender-of-last-resort system. 
B) offered checkable deposits to their customers. 
C) were not allowed to operate across state lines. 
D) were required to hold more capital than depository banks. 
A) were outside of the lender-of-last-resort system. 
B) offered checkable deposits to their customers. 
C) were not allowed to operate across state lines. 
D) were required to hold more capital than depository banks.

Question 3

Maturity transformation must always begin with the financial institution accepting deposits.

Accepted Answer

A) True 
 B)False

Question 4

Banking crises are usually followed by periods of economic expansion.

Accepted Answer

A) True 
 B)False

Question 5

The primary cause of the banking crises that occurred between 1970 and 2007 in poor countries was_____. The primary cause in wealthy countries was _____.

Accepted Answer

A) too much government regulation; too much government regulation 
B) too-high capital requirements; the purchase of too much government debt 
C) too-low capital requirements; too-high capital requirements 
D) corruption; real estate bubbles 
A) too much government regulation; too much government regulation 
B) too-high capital requirements; the purchase of too much government debt 
C) too-low capital requirements; too-high capital requirements 
D) corruption; real estate bubbles

Question 6

Fiscal austerity is _____ fiscal policy, such as _____ in government spending and tax _____ designed to _____ unemployment and _____.

Accepted Answer

A) expansionary; increases; cuts; reduce; increase output 
B) expansionary; increases; cuts; increase; decrease output 
C) contractionary; decreases; increases; ignore; reduce budget deficits 
D) contractionary; decreases; increases; ignore; increase budget deficits 
A) expansionary; increases; cuts; reduce; increase output 
B) expansionary; increases; cuts; increase; decrease output 
C) contractionary; decreases; increases; ignore; reduce budget deficits 
D) contractionary; decreases; increases; ignore; increase budget deficits

Question 7

Fiscal austerity is expansionary fiscal measures, such as increases in government spending and decreases in taxes, designed to reduce unemployment.

Accepted Answer

A) True 
 B)False

Question 8

Briefly explain the four main elements of the Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act).

Accepted Answer

(1) The Dodd-Frank Act established a new

Question 9

By acting as a lender of last resort, the central bank:

Accepted Answer

A) causes a vicious cycle of deleveraging. 
B) prevents a vicious cycle of deleveraging. 
C) is decreasing the amount of reserves that a bank is required to hold. 
D) may keep interest rates low but will likely drive unemployment up. 
A) causes a vicious cycle of deleveraging. 
B) prevents a vicious cycle of deleveraging. 
C) is decreasing the amount of reserves that a bank is required to hold. 
D) may keep interest rates low but will likely drive unemployment up.

Question 10

In a severe banking crisis:

Accepted Answer

A) very few banks in the system actually go into bankruptcy. 
B) government intervention usually is not required, since the market outcome is always preferable to one that results from government intervention. 
C) the economy usually falls into a severe recession followed by a slow recovery. 
D) economic growth usually resumes quickly after the crisis is resolved. 
A) very few banks in the system actually go into bankruptcy. 
B) government intervention usually is not required, since the market outcome is always preferable to one that results from government intervention. 
C) the economy usually falls into a severe recession followed by a slow recovery. 
D) economic growth usually resumes quickly after the crisis is resolved.

Question 11

The savings and loans crisis of the 1980s was caused by an asset bubble in commercial real estate.

Accepted Answer

A) True 
 B)False

Question 12

The panic of 1893 began when:

Accepted Answer

A) the Treaty of Paris was signed, ending the American Revolution. 
B) the Titanic sank. 
C) real estate developers built too many office buildings. 
D) the Philadelphia and Reading Railroad failed. 
A) the Treaty of Paris was signed, ending the American Revolution. 
B) the Titanic sank. 
C) real estate developers built too many office buildings. 
D) the Philadelphia and Reading Railroad failed.

Question 13

The purpose of open market purchases is to:

Accepted Answer

A) decrease the government budget deficit. 
B) increase the government budget deficit. 
C) increase consumer and investment spending. 
D) decrease consumer and investment spending. 
A) decrease the government budget deficit. 
B) increase the government budget deficit. 
C) increase consumer and investment spending. 
D) decrease consumer and investment spending.

Question 14

The existence of banks:

Accepted Answer

A) increases the severity of the trade-off between rate of return and liquidity. 
B) decreases the severity of the trade-off between rate of return and liquidity. 
C) has no effect on the trade-off between rate of return and liquidity. 
D) decreases both the rate of return and the liquidity of its customers' assets. 
A) increases the severity of the trade-off between rate of return and liquidity. 
B) decreases the severity of the trade-off between rate of return and liquidity. 
C) has no effect on the trade-off between rate of return and liquidity. 
D) decreases both the rate of return and the liquidity of its customers' assets.

Question 15

Severe banking crises usually lead to:

Accepted Answer

A) low levels of unemployment. 
B) high levels of unemployment. 
C) high levels of saving and investment spending. 
D) rapid growth of real GDP per capita. 
A) low levels of unemployment. 
B) high levels of unemployment. 
C) high levels of saving and investment spending. 
D) rapid growth of real GDP per capita.

Question 16

The threat of a financial crisis in Europe in 2011 and 2012 was based on problems with:

Accepted Answer

A) home loans in Germany. 
B) political instability in France. 
C) public debt problems in southern Europe and Ireland. 
D) striking labor unions in northern Europe. 
A) home loans in Germany. 
B) political instability in France. 
C) public debt problems in southern Europe and Ireland. 
D) striking labor unions in northern Europe.

Question 17

Before 2010 and passage of Dodd-Frank, shadow banks offered their customers a higher rate of return than commercial banks because shadow banks _____, but commercial banks _____.

Accepted Answer

A) could pay interest on deposits; could not. 
B) were allowed to invest in stocks of foreign corporations; could invest only in stocks of U.S. corporations. 
C) had to hold a large amount of reserves and capital; were not required to keep as much in reserve 
D) were not subject to reserve and capital requirements; had to hold reserves and meet capital requirements 
A) could pay interest on deposits; could not. 
B) were allowed to invest in stocks of foreign corporations; could invest only in stocks of U.S. corporations. 
C) had to hold a large amount of reserves and capital; were not required to keep as much in reserve 
D) were not subject to reserve and capital requirements; had to hold reserves and meet capital requirements

Question 18

Assets that offer a _____ rate of return also offer _____ liquidity.

Accepted Answer

A) higher; higher 
B) lower; lower 
C) higher; lower 
D) There is no trade-off between rate of return and liquidity. 
A) higher; higher 
B) lower; lower 
C) higher; lower 
D) There is no trade-off between rate of return and liquidity.

Question 19

Which of the following was NOT one of the problems facing almost all major economies after the 2008 financial crisis?

Accepted Answer

A) high unemployment 
B) low growth of output 
C) high interest rates on public debt 
D) inflation 
A) high unemployment 
B) low growth of output 
C) high interest rates on public debt 
D) inflation

Question 20

The asset bubble that caused the savings and loan crisis of the 1980s was in:

Accepted Answer

A) gold. 
B) oil futures. 
C) stocks of Internet companies. 
D) commercial real estate. 
A) gold. 
B) oil futures. 
C) stocks of Internet companies. 
D) commercial real estate.

A repo is a long-term loan.

Before the financial crisis in 2008 shadow banks:

Maturity transformation must always begin with the financial institution accepting deposits.

Banking crises are usually followed by periods of economic expansion.

The primary cause of the banking crises that occurred between 1970 and 2007 in poor countries was_. The primary cause in wealthy countries was _.

Fiscal austerity is ___ fiscal policy, such as _ in government spending and tax _ designed to _ unemployment and ___.

Fiscal austerity is expansionary fiscal measures, such as increases in government spending and decreases in taxes, designed to reduce unemployment.

Briefly explain the four main elements of the Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act).

By acting as a lender of last resort, the central bank:

In a severe banking crisis:

The savings and loans crisis of the 1980s was caused by an asset bubble in commercial real estate.

The panic of 1893 began when:

The purpose of open market purchases is to:

The existence of banks:

Severe banking crises usually lead to:

The threat of a financial crisis in Europe in 2011 and 2012 was based on problems with:

Before 2010 and passage of Dodd-Frank, shadow banks offered their customers a higher rate of return than commercial banks because shadow banks _, but commercial banks _.

Assets that offer a _ rate of return also offer _ liquidity.

Which of the following was NOT one of the problems facing almost all major economies after the 2008 financial crisis?

The asset bubble that caused the savings and loan crisis of the 1980s was in:

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

A repo is a long-term loan.

Before the financial crisis in 2008 shadow banks:

Maturity transformation must always begin with the financial institution accepting deposits.

Banking crises are usually followed by periods of economic expansion.

The primary cause of the banking crises that occurred between 1970 and 2007 in poor countries was_____. The primary cause in wealthy countries was _____.

Fiscal austerity is _____ fiscal policy, such as _____ in government spending and tax _____ designed to _____ unemployment and _____.

Fiscal austerity is expansionary fiscal measures, such as increases in government spending and decreases in taxes, designed to reduce unemployment.

Briefly explain the four main elements of the Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act).

By acting as a lender of last resort, the central bank:

In a severe banking crisis:

The savings and loans crisis of the 1980s was caused by an asset bubble in commercial real estate.

The panic of 1893 began when:

The purpose of open market purchases is to:

The existence of banks:

Severe banking crises usually lead to:

The threat of a financial crisis in Europe in 2011 and 2012 was based on problems with:

Before 2010 and passage of Dodd-Frank, shadow banks offered their customers a higher rate of return than commercial banks because shadow banks _____, but commercial banks _____.

Assets that offer a _____ rate of return also offer _____ liquidity.

Which of the following was NOT one of the problems facing almost all major economies after the 2008 financial crisis?

The asset bubble that caused the savings and loan crisis of the 1980s was in:

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

The primary cause of the banking crises that occurred between 1970 and 2007 in poor countries was_. The primary cause in wealthy countries was _.

Fiscal austerity is ___ fiscal policy, such as _ in government spending and tax _ designed to _ unemployment and ___.

Before 2010 and passage of Dodd-Frank, shadow banks offered their customers a higher rate of return than commercial banks because shadow banks _, but commercial banks _.

Assets that offer a _ rate of return also offer _ liquidity.