Question 1

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 2

When a bank's assets cannot cover its liabilities, the bank is:

Accepted Answer

A)  illiquid. 
B)  nationalized. 
C)  immediately shut down. 
D)  bought out by its shareholders. 
E)  insolvent. 
A)  illiquid. 
B)  nationalized. 
C)  immediately shut down. 
D)  bought out by its shareholders. 
E)  insolvent.

Question 3

Subprime loans are loans made to households that do not necessarily meet "standard" lending restrictions.

Accepted Answer

A) True 
 B)False

Question 4

In the middle of 2009, ________; by February 2010, ________.

Accepted Answer

A)  over 8 million jobs were lost; short-run output bottomed out at over -6 percent 
B)  short-run output bottomed out at below -7 percent; over 8 million jobs were lost 
C)  inflation was 5 percent; the unemployment rate was 12 percent 
D)  the federal funds rate was 5 percent; it had fallen to 1 percent 
E)  unemployment fell to 8 percent; home sales were rising steadily 
A)  over 8 million jobs were lost; short-run output bottomed out at over -6 percent 
B)  short-run output bottomed out at below -7 percent; over 8 million jobs were lost 
C)  inflation was 5 percent; the unemployment rate was 12 percent 
D)  the federal funds rate was 5 percent; it had fallen to 1 percent 
E)  unemployment fell to 8 percent; home sales were rising steadily

Question 5

Unemployment in the Great Recession peaked at 10 percent.

Accepted Answer

A) True 
 B)False

Question 6

One of the key differences between the United States and the European euro area countries in the aftermath of the Great Recession is that:

Accepted Answer

A)  U.S. inflation and unemployment are both about 4 percent, and in Europe, they are about 8 percent. 
B)  GDP growth in the United States is negative, but European growth rates are higher than normal. 
C)  inflation in the United States is negative, while Europe has extremely high inflation rates. 
D)  the U.S. unemployment rate has largely returned to prerecession levels, whereas European unemployment is still above prerecession levels. 
E)  interest rates in the United States have risen sharply, while those in the euro area are negative. 
A)  U.S. inflation and unemployment are both about 4 percent, and in Europe, they are about 8 percent. 
B)  GDP growth in the United States is negative, but European growth rates are higher than normal. 
C)  inflation in the United States is negative, while Europe has extremely high inflation rates. 
D)  the U.S. unemployment rate has largely returned to prerecession levels, whereas European unemployment is still above prerecession levels. 
E)  interest rates in the United States have risen sharply, while those in the euro area are negative.

Question 7

The average decline in GDP growth for all recessions 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; 4.7 
E)  0; 2.2 
A)  2.1; 6.1 
B)  0.4; 31.4 
C)  3.7; 1.7 
D)  1.7; 4.7 
E)  0; 2.2

Question 8

IMF studies conducted after the financial crisis projected negative growth in:

Accepted Answer

A)  Italy. 
B)  Japan. 
C)  the United Kingdom. 
D)  China. 
E)  Brazil. 
A)  Italy. 
B)  Japan. 
C)  the United Kingdom. 
D)  China. 
E)  Brazil.

Question 9

Briefly compare the impact of the Great Recession and financial crises to other U.S. recessions since 1950.

Accepted Answer

This recession was generally worse when

Question 10

The following figure shows the daily three-month treasury yield in September 2008. Refer to the following figure when answering the following questions.
Figure 10.1: Daily Three-Month Treasury Yield: September 2008   
-Consider the data in Figure 10.1. What does the data for mid-September in this figure suggest?

Accepted Answer

A)  Increasing investor confidence in the effectiveness of TARP led to smaller purchases of U.S. treasuries. 
B)  There was a rapid movement of assets from treasuries to stocks. 
C)  In the aftermath of the collapse of Lehman Brothers, investors fled to the safety of short-term treasuries. 
D)  Prices of gold declined in line with short-term treasury yields. 
E)  General Motors and Chrysler declared bankruptcy. 
A)  Increasing investor confidence in the effectiveness of TARP led to smaller purchases of U.S. treasuries. 
B)  There was a rapid movement of assets from treasuries to stocks. 
C)  In the aftermath of the collapse of Lehman Brothers, investors fled to the safety of short-term treasuries. 
D)  Prices of gold declined in line with short-term treasury yields. 
E)  General Motors and Chrysler declared bankruptcy.

Question 11

In addition to oil price increases in 2008:

Accepted Answer

A)  natural gas prices fell. 
B)  the interest rate premium fell. 
C)  commodity prices also rose. 
D)  inflation remained unchanged. 
E)  aggregate supply increased. 
A)  natural gas prices fell. 
B)  the interest rate premium fell. 
C)  commodity prices also rose. 
D)  inflation remained unchanged. 
E)  aggregate supply increased.

Question 12

The following table shows real GDP and potential real GDP for the years 2005-2015. Refer to this table when answering the following questions.
Table 10.1 ($ billions)   (Source: Federal Reserve Economic Data, St. Louis Federal Reserve)
-During which year was the economy in an expansionary gap?

Accepted Answer

A)  2001 
B)  2004 
C)  2002 
D)  2003 
E)  none of the above 
A)  2001 
B)  2004 
C)  2002 
D)  2003 
E)  none of the above

Question 13

The majority of mortgage-backed securities were held by:

Accepted Answer

A)  large commercial and investment banks. 
B)  the Fed. 
C)  the federal government. 
D)  large teacher pension funds. 
E)  money market mutual funds. 
A)  large commercial and investment banks. 
B)  the Fed. 
C)  the federal government. 
D)  large teacher pension funds. 
E)  money market mutual funds.

Question 14

Figure 10.2 shows the U.S. housing price index (solid line, left axis) and one-year adjustable mortgage rates (dashed line, right axis). In the context of the housing and financial crisis, discuss the relationship between these two series.Figure 10.2: Housing Prices and One -Year Adjustable Mortgage Rates   
(Source: Federal Reserve Economic II, St. Louis Federal Reserve)

Accepted Answer

The answer will depend on the student; h

Question 15

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 16

In 1933, the ________ was established to prevent bank runs; in 2008, ________ was set up to increase liquidity in financial markets.

Accepted Answer

A)  Troubled Asset Relief Fund; AIG 
B)  Federal Deposit Insurance Corporation; the Troubled Asset Relief Fund 
C)  U.S. Department of Treasury; the Comptroller of the Currency 
D)  Federal Reserve System; the Federal Deposit Insurance Corporation 
E)  Depository Institutions Deregulation and Monetary Control Act; the Glass-Steagall Act 
A)  Troubled Asset Relief Fund; AIG 
B)  Federal Deposit Insurance Corporation; the Troubled Asset Relief Fund 
C)  U.S. Department of Treasury; the Comptroller of the Currency 
D)  Federal Reserve System; the Federal Deposit Insurance Corporation 
E)  Depository Institutions Deregulation and Monetary Control Act; the Glass-Steagall Act

Question 17

When was the deepest recession since the end of World War II?

Accepted Answer

A)  1981-1982 
B)  2007-2009 
C)  1973-1975 
D)  1948-1949 
E)  1969-1970 
A)  1981-1982 
B)  2007-2009 
C)  1973-1975 
D)  1948-1949 
E)  1969-1970

Question 18

When all depositors converge on a bank to remove their deposits there is a(n):

Accepted Answer

A)  bank run. 
B)  bank panic. 
C)  liquidity crisis. 
D)  financial meltdown. 
E)  insolvency. 
A)  bank run. 
B)  bank panic. 
C)  liquidity crisis. 
D)  financial meltdown. 
E)  insolvency.

Question 19

Bank leverage is equal to a bank's assets minus its liabilities.

Accepted Answer

A) True 
 B)False

Question 20

Explain the relationships between the global savings glut, subprime loans, interest rates, and the burst housing bubble.

Accepted Answer

The global savings glut led a worldwide

The Great Recession began in and ended in .

When a bank's assets cannot cover its liabilities, the bank is:

Subprime loans are loans made to households that do not necessarily meet "standard" lending restrictions.

In the middle of 2009, ; by February 2010, .

Unemployment in the Great Recession peaked at 10 percent.

One of the key differences between the United States and the European euro area countries in the aftermath of the Great Recession is that:

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

IMF studies conducted after the financial crisis projected negative growth in:

Briefly compare the impact of the Great Recession and financial crises to other U.S. recessions since 1950.

In addition to oil price increases in 2008:

The following table shows real GDP and potential real GDP for the years 2005-2015. Refer to this table when answering the following questions. Table 10.1 ($ billions) (Source: Federal Reserve Economic Data, St. Louis Federal Reserve) -During which year was the economy in an expansionary gap?

The majority of mortgage-backed securities were held by:

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

In 1933, the was established to prevent bank runs; in 2008, was set up to increase liquidity in financial markets.

When was the deepest recession since the end of World War II?

When all depositors converge on a bank to remove their deposits there is a(n):

Bank leverage is equal to a bank's assets minus its liabilities.

Explain the relationships between the global savings glut, subprime loans, interest rates, and the burst housing bubble.

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

Dsge Models: the Frontier of Business Cycle Research

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 Great Recession began in ________ and ended in ________.

When a bank's assets cannot cover its liabilities, the bank is:

Subprime loans are loans made to households that do not necessarily meet "standard" lending restrictions.

In the middle of 2009, ________; by February 2010, ________.

Unemployment in the Great Recession peaked at 10 percent.

One of the key differences between the United States and the European euro area countries in the aftermath of the Great Recession is that:

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

IMF studies conducted after the financial crisis projected negative growth in:

Briefly compare the impact of the Great Recession and financial crises to other U.S. recessions since 1950.

In addition to oil price increases in 2008:

The following table shows real GDP and potential real GDP for the years 2005-2015. Refer to this table when answering the following questions. Table 10.1 ($ billions) (Source: Federal Reserve Economic Data, St. Louis Federal Reserve) -During which year was the economy in an expansionary gap?

The majority of mortgage-backed securities were held by:

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

In 1933, the ________ was established to prevent bank runs; in 2008, ________ was set up to increase liquidity in financial markets.

When was the deepest recession since the end of World War II?

When all depositors converge on a bank to remove their deposits there is a(n):

Bank leverage is equal to a bank's assets minus its liabilities.

Explain the relationships between the global savings glut, subprime loans, interest rates, and the burst housing bubble.

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

Dsge Models: the Frontier of Business Cycle Research

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 .

In the middle of 2009, ; by February 2010, .

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

In 1933, the was established to prevent bank runs; in 2008, was set up to increase liquidity in financial markets.