Question 1

If home prices rise far above the value of the homeowner's mortgage loan,

Accepted Answer

A)  default risk faced by lenders tends to decrease.
B)  default risk faced by lenders tends to increase.
C)  homeowners will be tempted to default on their mortgage loans.
D)  homeowners will have greater difficulty obtaining a home equity line of credit. A

Question 2

Non-discretionary fiscal policies that increase aggregate demand tend to result in

Accepted Answer

A)  lower Real GDP ("RGDP") and a higher price level ("PI") .
B)  higher Real GDP ("RGDP") and a higher price level ("PI") .
C)  lower Real GDP ("RGDP") and a lower price level ("PI") .
D)  higher Real GDP ("RGDP") and a lower price level ("PI") . B

Question 3

The new tools of monetary policy that the Fed employed included

Accepted Answer

A)  focusing exclusively on the traditional tools of monetary policy.
B)  the sustained purchase of longer term federal debt
C)  discretionary fiscal policy.
D)  nondiscretionary fiscal policy. B

Question 4

During the recession of 2007-2009, the Federal Reserve began cutting its target for the Federal Funds rate in

Accepted Answer

A)  January of 2007.
B)  September of 2007.
C)  September of 2008.
D)  January of 2009.

Question 5

The new tools of monetary policy that the Fed employed included

Accepted Answer

A)  focusing exclusively on the traditional tools of monetary policy.
B)  the sustained purchase of mortgage backed securities
C)  discretionary fiscal policy.
D)  nondiscretionary fiscal policy.

Question 6

In 2007 relative to 2001 in the U. S., household

Accepted Answer

A)  revolving debt was higher and household non-revolving debt was lower.
B)  revolving debt was lower and household non-revolving debt was higher.
C)  revolving and non-revolving debt both were lower.
D)  revolving and non-revolving debt both were higher.

Question 7

One of the most significant factors causing the recession of 2007-2009 was

Accepted Answer

A)  very low crude oil prices.
B)  the bursting of the housing bubble.
C)  very low interest rates maintained by the Federal Reserve.
D)  the huge federal government budget surplus.

Question 8

The efforts to reduce the deficit in 2011 can be best thought of as using

Accepted Answer

A)  the traditional tools of monetary policy.
B)  new tools of monetary policy.
C)  discretionary fiscal policy.
D)  none of these options are correct.

Question 9

Non-discretionary fiscal policy designed to counteract a reduction in aggregate demand might include

Accepted Answer

A)  an increase in the money stock.
B)  a return to the gold standard.
C)  increased government spending on unemployment benefits.
D)  all of the options are correct.

Question 10

Prior to the recession of 2007-2009

Accepted Answer

A)  revolving debt was rising rapidly but non-revolving debt was not.
B)  non-revolving debt was rising rapidly but revolving debt was not.
C)  neither revolving nor non-revolving debt were rising rapidly.
D)  both revolving and non-revolving debt were rising rapidly.

Question 11

TARP was created during the Presidency of

Accepted Answer

A)  President Clinton and only implemented by President G.W. Bush.
B)  President G.H.W. Bush and only implemented by President G.W. Bush.
C)  President G.W. Bush.
D)  President B. Obama.

Question 12

The recession of 2007-2009 started

Accepted Answer

A)  with the financial collapse.
B)  rather mildly in late 2007.
C)  abruptly in 2007 with higher gasoline prices.
D)  in 2006.

Question 13

The elements of the stimulus package adopted in 2009 that allowed states to pay $25 per week more than they had being paying in unemployment compensation should be considered

Accepted Answer

A)  discretionary fiscal policy.
B)  non-discretionary fiscal policy.
C)  monetary policy.
D)  neither discretionary nor non-discretionary fiscal policy programs.

Question 14

Housing Starts peaked

Accepted Answer

A)  right as the recession began in December 2007.
B)  after the recession began in December 2007.
C)  before the recession of 2007-2009 began.
D)  In 1999

Question 15

If a fiscal policy program requires new legislation to make it happen, it is necessarily

Accepted Answer

A)  non-discretionary.
B)  discretionary.
C)  contractionary.
D)  unconstitutional.

Question 16

As unemployment rose in 2008, non-discretionary fiscal policy measures included

Accepted Answer

A)  increased spending on unemployment insurance, food stamps and Medicaid.
B)  major reductions in federal spending on bridges and highways.
C)  significant reductions in the income tax rates paid by high-income individual.
D)  provision of Universal Health Insurance for all Americans.

Question 17

The main effect on the economy of the financial sector crisis in late 2008 was

Accepted Answer

A)  reduced aggregate demand.
B)  increased aggregate demand.
C)  reduced aggregate supply.
D)  increased aggregate supply.

Question 18

The elements of the stimulus package adopted in 2009 that allowed states to continue to make their unemployment compensation payments despite having exhausted their funds should be considered

Accepted Answer

A)  discretionary fiscal policy.
B)  non-discretionary fiscal policy.
C)  monetary policy.
D)  neither discretionary nor non-discretionary fiscal policy programs.

Question 19

The stimulus package adopted in 2009 by newly-elected President Obama included

Accepted Answer

A)  only discretionary fiscal policy programs.
B)  only non-discretionary fiscal policy programs.
C)  both discretionary and non-discretionary fiscal policy programs.
D)  neither discretionary nor non-discretionary fiscal policy programs.

Question 20

In January of 2006, the Federal Reserve

Accepted Answer

A)  increased its target federal funds rate by a larger amount than it had in several years.
B)  increased its target federal funds rate by a smaller amount than it had in several years.
C)  increased its target federal funds rate by the same amount as it had in recent years.
D)  left its target federal funds rate unchanged.

Exam 14: The Recession of 2007-2009: Causes and Policy Responses

If home prices rise far above the value of the homeowner's mortgage loan,

Non-discretionary fiscal policies that increase aggregate demand tend to result in

The new tools of monetary policy that the Fed employed included

During the recession of 2007-2009, the Federal Reserve began cutting its target for the Federal Funds rate in

The new tools of monetary policy that the Fed employed included

In 2007 relative to 2001 in the U. S., household

One of the most significant factors causing the recession of 2007-2009 was

The efforts to reduce the deficit in 2011 can be best thought of as using

Non-discretionary fiscal policy designed to counteract a reduction in aggregate demand might include

Prior to the recession of 2007-2009

TARP was created during the Presidency of

The recession of 2007-2009 started

The elements of the stimulus package adopted in 2009 that allowed states to pay $25 per week more than they had being paying in unemployment compensation should be considered

Housing Starts peaked

If a fiscal policy program requires new legislation to make it happen, it is necessarily

As unemployment rose in 2008, non-discretionary fiscal policy measures included

The main effect on the economy of the financial sector crisis in late 2008 was

The elements of the stimulus package adopted in 2009 that allowed states to continue to make their unemployment compensation payments despite having exhausted their funds should be considered

The stimulus package adopted in 2009 by newly-elected President Obama included

In January of 2006, the Federal Reserve