Deck 1: A Tour of the World

Question 1

Briefly explain why the decline in housing prices led to a major financial crisis.

Answer 1

Many of the mortgage loans that had been given out during earlier expansion were of poor quality.Many of the borrowers had taken too large a loan and were increasingly unable to make mortgage payments.mortgage backed securities were so complex that their value was nearly impossible to assess.Not knowing the quality of the assets that other banks had on their balance sheet,banks became very reluctant to lend to each other for fear that the bank to which they lent might not be able to repay.The credit market froze up.Unable to borrow,and with assets if uncertain value,many banks found them in trouble.The bankruptcy of Lehman Brothers put other banks at risk of going bankrupt as well.The whole financial system was in trouble.

Question 2

The most recent financial crisis started in

A)stock market.
B)bond market.
C)foreign exchange market.
D)housing market.

Answer 2

housing market.

Question 3

In 2014 ,the U.S.GDP accounts for ________ of world output.

A)20%
B)23%
C)45%
D)50%

Answer 3

23%

Question 4

In 2014,output per capita in the United States was approximately equal to

A)$15,500.
B)$25,800.
C)$43,800.
D)$54,592.

Question 5

How many countries are in the European Union?

A)28
B)6
C)21
D)17

Question 6

Discuss the types of policies that could be implemented to reduce European unemployment.

Question 7

At what point could the Euro be used as currency?

A)January 1, 1998
B)January 1, 1999
C)January 1, 2000
D)January 1, 2002

Question 8

Discuss what is meant by labor market rigidities and explain how they might cause the relatively high unemployment in Europe.

Question 9

In 2010,output per capita in China was approximately equal to

A)$2,100.
B)$7,627.
C)$22,100.
D)$32,100.

Question 10

Economists have suggested that the relatively higher unemployment in Europe has been caused by which of the following?

A)relatively high unemployment benefits
B)relatively high level of worker protection
C)inadequate macroeconomic policies
D)increased labor costs
E) all of the above

Question 11

Discuss some of the potential benefits and costs of the adoption of the Euro.

Question 12

Explain how the financial crisis turned into a major economic crisis.

Question 13

Which of the following countries had the lowest level of output per capita in 2014?

A)Spain
B)France
C)Italy
D)German

Question 14

What problems remain in advanced countries after the crisis?

Question 15

Most economists believe that the source of European high unemployment in the past two decades is

A)labor market institutions.
B)tight monetary policy.
C)tight fiscal policy.
D)financial crisis.

Question 16

In 2015,the unemployment in the U.S.was

A)5%.
B)11%.
C)5)4%.
D)4)6%.

Question 17

How many countries are in the Euro area?

A)19
B)27
C)21
D)11

Question 18

Explain why the U.S.crisis became a world crisis.

Question 19

Inflation represents

A)an increase in output.
B)an increase in the aggregate price level.
C)an increase in the unemployment rate.
D)a recession.

Question 20

The standard of living typically refers to

A)the rate of unemployment.
B)output per capita.
C)wealth per capita.
D)all of the above

Question 21

Between 2010 and 2014,the annual rate of output growth in China was approximately equal to

A)2%.
B)5%.
C)9%.
D)20%.

Question 22

Which of the following explains the relatively high growth rate of output in China since 1980?

A)accumulation of capital
B)technological progress
C)a transition from central planning to a market economy
D)all of the above

Question 23

What are the two primary sources of economic growth in China since 1980?

Question 24

In addition to capital accumulation and technological progress,what are some of the other possible explanations for recent output growth in China?