Question 1

If you have $1,000 in an account that offers "3x" margin,you can effectively buy:

Accepted Answer

A)  $1,000 worth of stocks.
B)  $2,000 worth of guaranteed government bonds.
C)  $3,000 worth of stocks.
D)  $3,000 worth of guaranteed government bonds.E) B) and D)
F) B) and C)

Question 2

One of the first issuances of stock was offered by the:

Accepted Answer

A)  East India Company.
B)  South Seas Company.
C)  Apple Company.
D)  North Seas Company.E) All of the above
F) B) and D)

Question 3

In events leading to the housing bubble,the credit-rating agencies rated the assets associated with the housing market:

Accepted Answer

A)  proper mid-level ratings indicating moderate risk,but were ignored.
B)  proper AAA ratings indicating low risk,but were ignored.
C)  proper AAA ratings indicating low risk,and turned out to be too optimistic.
D)  proper mid-level ratings indicating moderate risk,and turned out to be too optimistic.E) A) and D)
F) B) and C)

Question 4

Which of the following actions did Congress take in the 1930s,in an effort to prevent future financial crises like the stock market crash of 1929?

Accepted Answer

A)  Glass-Steagall Banking Act
B)  Formation of the SEC
C)  Formation of the FDIC
D)  All of these statements are true.E) B) and C)
F) A) and D)

Question 5

Which of the following actions did Congress take in the 1930s,in an effort to prevent future financial crises like the stock market crash of 1929?

Accepted Answer

A)  Glass-Steagall Banking Act
B)  Bubble Act
C)  Hastings Banking Act
D)  Formation of the CBO (Congressional Budget Office) E) A) and B)
F) A) and D)

Question 6

The two interconnected concepts that lie at the heart of many financial crises are:

Accepted Answer

A)  rational expectations and leverage.
B)  irrational expectations and forecasting.
C)  forecasting and leverage.
D)  irrational expectations and leverage.E) B) and C)
F) None of the above

Question 7

As the housing bubble collapsed,the combination of increasing interest rates and pessimism about future economic prospects:

Accepted Answer

A)  increased both consumption and investment spending.
B)  decreased consumption and increased investment spending.
C)  decreased both consumption and investment spending.
D)  increased consumption and decreased investment spending.E) All of the above
F) B) and D)

Question 8

If you lost 10 percent on $200 worth of stock in a 3x margin account,then you would lose:

Accepted Answer

A)  $60.
B)  $20.
C)  $30.
D)  $40.E) A) and D)
F) A) and C)

Question 9

The decrease in consumer spending that occurred after the collapse of the housing bubble caused:

Accepted Answer

A)  aggregate demand to increase.
B)  aggregate demand to decrease.
C)  aggregate supply to increase.
D)  aggregate supply to decrease.E) None of the above
F) A) and B)

Question 10

The "housing bubble" discussed in Chapter 33 refers to:

Accepted Answer

A)  housing prices rising much more quickly than the rest of prices in the economy.
B)  housing prices within a certain area of the U.S.rising disproportionately with the rest of houses in the economy.
C)  an unexplained increase in the demand for houses which caused the prices of houses to rise.
D)  a supply shock to the housing market,which caused housing prices to increase.E) A) and B)
F) B) and C)

Question 11

Which of the following is a reason why aggregate supply decreased following the housing bubble collapse?

Accepted Answer

A)  Businesses could not access credit to carry out their daily operations.
B)  Consumption decreased.
C)  People stopped investing in homes.
D)  All of these caused aggregate supply to decrease.E) All of the above
F) A) and C)

Question 12

When your broker sees that you are in danger of running through your money and forces you to sell your stock and use the money to pay back your loan,he is making a:

Accepted Answer

A)  margin call.
B)  leverage call.
C)  stock sales call.
D)  futures call.E) C) and D)
F) B) and D)

Question 13

Which of the following actions did Congress take in the 1930s,in an effort to prevent future financial crises like the stock market crash of 1929?

Accepted Answer

A)  Formation of the FDIC
B)  Bubble Act
C)  Formation of the CBO
D)  All of these statements are true.E) A) and D)
F) All of the above

Question 14

Markets are a powerful tool for the efficient allocation of:

Accepted Answer

A)  money.
B)  scarce resources.
C)  bartered goods.
D)  All of these statements are true.E) C) and D)
F) A) and B)

Question 15

The reforms introduced by Congress in the 1930s led to the era now referred to as the:

Accepted Answer

A)  Great Moderation.
B)  Great Crash.
C)  Great Depression.
D)  Great Recession.E) B) and D)
F) B) and C)

Question 16

After nearly tripling the money supply after the housing market crash and subsequent financial crisis,inflation:

Accepted Answer

A)  began to spiral out of control,due to the newfound solvency of banks,increasing lending and thus the money multiplier effect.
B)  continued to fall,due to the lack of consumer confidence in the market,decreasing the marginal propensity to consume.
C)  stayed relatively low,due to the lack of lending by banks,reducing the effectiveness of the money multiplier.
D)  has slowly increased,due to restored consumer confidence in the market,increasing the marginal propensity to consume.E) All of the above
F) A) and B)

Question 17

As the Fed responded to the financial crisis that followed the collapse of the housing market,certain banks were:

Accepted Answer

A)  deemed too large to fail,as their failure would carry the risk of causing a domino effect in the highly integrated financial system.
B)  deemed too large to stay afloat,as they would be too costly to save.
C)  deemed too small to fail,as they were easy to save.
D)  None of these statements is true.E) A) and B)
F) All of the above

Question 18

As the housing bubble collapsed,and the value of homes decreased,consumers loss of wealth led to:

Accepted Answer

A)  decreased consumption,which increased prices,which increased the costs of production,leading to more job loss.
B)  decreased consumption,which further depressed prices,which reduced output further,leading to more job loss.
C)  increased consumption,which increased prices,which increased the costs of production,leading to more job loss.
D)  decreased consumption,which further depressed prices,which decreased the amount people had to spend,and increased savings.E) A) and D)
F) All of the above

Question 19

The practice of packaging individual debts into a single uniform asset that can be easily bought and sold is called:

Accepted Answer

A)  leveraging.
B)  securitization.
C)  federally-backed financing.
D)  bundled risk.E) A) and B)
F) A) and D)

Question 20

How did the collapse of the housing bubble cause a contraction in output?

Accepted Answer

A)  Because banks were unwilling to lend,many businesses were suddenly unable to access credit for their day-to-day needs.
B)  When homeowners lost value in their homes,they stopped saving,which reduced banks' ability to lend.
C)  Because consumers lost confidence in the banking industry,they stopped depositing money,so banks could no longer lend.
D)  None of these explains how the housing bubble collapse led to reduced output.E) A) and D)
F) B) and C)

Exam 33: Financial Crisis

Markets are a powerful tool for the efficient allocation of:

Correct AnswerverifiedShow Answer

One of the first issuances of stock was offered by the:

Correct AnswerverifiedShow Answer

Which of the following actions did Congress take in the 1930s,in an effort to prevent future financial crises like the stock market crash of 1929?

Correct AnswerverifiedShow Answer

The two interconnected concepts that lie at the heart of many financial crises are:

Correct AnswerverifiedShow Answer

If you lost 10 percent on $200 worth of stock in a 3x margin account,then you would lose:

Correct AnswerverifiedShow Answer

As the Fed responded to the financial crisis that followed the collapse of the housing market,certain banks were:

Correct AnswerverifiedShow Answer

The decrease in consumer spending that occurred after the collapse of the housing bubble caused:

Correct AnswerverifiedShow Answer

The reforms introduced by Congress in the 1930s led to the era now referred to as the:

Correct AnswerverifiedShow Answer

In events leading to the housing bubble,the credit-rating agencies rated the assets associated with the housing market:

Correct AnswerverifiedShow Answer

After nearly tripling the money supply after the housing market crash and subsequent financial crisis,inflation:

Correct AnswerverifiedShow Answer

Which of the following actions did Congress take in the 1930s,in an effort to prevent future financial crises like the stock market crash of 1929?

Correct AnswerverifiedShow Answer

The practice of packaging individual debts into a single uniform asset that can be easily bought and sold is called:

Correct AnswerverifiedShow Answer

How did the collapse of the housing bubble cause a contraction in output?

Correct AnswerverifiedShow Answer

When your broker sees that you are in danger of running through your money and forces you to sell your stock and use the money to pay back your loan,he is making a:

Correct AnswerverifiedShow Answer

Which of the following actions did Congress take in the 1930s,in an effort to prevent future financial crises like the stock market crash of 1929?

Correct AnswerverifiedShow Answer

If you have $1,000 in an account that offers "3x" margin,you can effectively buy:

Correct AnswerverifiedShow Answer

Which of the following is a reason why aggregate supply decreased following the housing bubble collapse?

Correct AnswerverifiedShow Answer

As the housing bubble collapsed,and the value of homes decreased,consumers loss of wealth led to:

Correct AnswerverifiedShow Answer

The "housing bubble" discussed in Chapter 33 refers to:

Correct AnswerverifiedShow Answer

As the housing bubble collapsed,the combination of increasing interest rates and pessimism about future economic prospects:

Correct AnswerverifiedShow Answer

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