Question 1

The introduction of the practice of securitization allowed:

Accepted Answer

A)  banks to more safely assume subprime mortgage loans.
B)  the government to promote a sense of security in the banking industry.
C)  banks to more safely leverage their investments.
D)  All of these statements are true.E) B) and C)
F) All of the above

Question 2

Banks that were so large in terms of assets or customers,or so historically important,that banking regulators allowed the bank to keep operating despite insolvency after the housing market crash were called:

Accepted Answer

A)  too small to fail.
B)  too large to succeed.
C)  too small to succeed.
D)  too large to fail.E) None of the above
F) C) and D)

Question 3

The recency effect is:

Accepted Answer

A)  a basic human tendency to overvalue recent experience when trying to predict the future.
B)  a hotly debated concept among psychologists and economists.
C)  earning a profit by betting against what everyone else is doing.
D)  accounting for most recent profits or losses first on financial statements.E) All of the above
F) None of the above

Question 4

As a result of the housing market crash overall output fell,and prices:

Accepted Answer

A)  decreased because the magnitude of shift was larger for aggregate demand than it was for aggregate supply.
B)  increased because the magnitude of shift was larger for aggregate demand than it was for aggregate supply.
C)  decreased because the magnitude of shift was smaller for aggregate demand than it was for aggregate supply.
D)  increased because the magnitude of shift was smaller for aggregate demand than it was for aggregate supply.E) None of the above
F) All of the above

Question 5

Stock markets in England were started in:

Accepted Answer

A)  the late seventeenth century.
B)  the late sixteenth century.
C)  the late eighteenth century.
D)  the late nineteenth century.E) B) and C)
F) A) and B)

Question 6

Leverage:

Accepted Answer

A)  is a dangerous tool,especially for big companies who do not understand its risk.
B)  has been outlawed since 2010.
C)  is often cited as the single reason for the Great Recession of 2008.
D)  All of these statements are true.E) A) and B)
F) All of the above

Question 7

When the housing market bubble burst,many people found that:

Accepted Answer

A)  they owed more than their house was now worth.
B)  it was much easier to sell their home.
C)  the value of their homes exceeded their mortgage loans.
D)  None of these statements is true.E) A) and C)
F) B) and C)

Question 8

The decrease in investment that occurred as a result of banks being unwilling to lend to businesses 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) A) and C)
F) All of the above

Question 9

The investors who bought mortgage-backed securities just before the housing bubble burst:

Accepted Answer

A)  were very removed from the original mortgage.
B)  were all very comfortable assuming high-risk assets.
C)  were confident in the rising home value underlying each mortgage.
D)  knew exactly what they were buying.E) B) and C)
F) B) and D)

Question 10

In response to the financial crisis which followed the housing bubble collapse,policy-makers feared stimulating demand first would cause:

Accepted Answer

A)  high inflation despite low economic growth and high unemployment.
B)  high inflation despite low economic growth and low unemployment.
C)  low economic growth despite low inflation and low unemployment.
D)  high unemployment despite low inflation and low economic growth.E) None of the above
F) A) and B)

Question 11

One reason the housing bubble occurred is because:

Accepted Answer

A)  people expected housing prices to continue to rise.
B)  it became easier to leverage more of a home's value,putting buyers more into debt.
C)  the seller of the mortgage had lost incentive to properly assess the risk.
D)  All of these statements are true.E) C) and D)
F) A) and D)

Question 12

Foreclosure is:

Accepted Answer

A)  when a bank takes ownership of a property because the property owner cannot make the mortgage payments due.
B)  when a person is forced to sell their home for less than what they paid for it.
C)  when a person is forced to sell their home for less than what it is currently worth.
D)  when a person is forced to sell their home for less than what they still owe for it.E) A) and B)
F) B) and C)

Question 13

The percent of disposable income that consumers have to spend to pay their debt is called:

Accepted Answer

A)  a debtor's mark.
B)  debt service.
C)  the cost of debt.
D)  debt accountability.E) A) and B)
F) None of the above

Question 14

The reforms introduced by Congress in the 1930s led to:

Accepted Answer

A)  the Great Crash.
B)  relative financial stability for over 70 years.
C)  a further decline that lasted for 25 years.
D)  the Great Depression to be worse than it needed to be.E) A) and C)
F) A) and D)

Question 15

If you lost 50 percent on $100 worth of stock in a 3x margin account,then you would lose:

Accepted Answer

A)  $50.
B)  $150.
C)  $300.
D)  $600.E) B) and C)
F) A) and C)

Question 16

Debt service is the percent of:

Accepted Answer

A)  GDP that is owed in debt.
B)  disposable income consumers have to spend to pay their debts.
C)  the total value of household debt that banks pay to create the loans.
D)  the total value of household debt that consumers pay in interest.E) B) and C)
F) B) and D)

Question 17

If you have $100 in an account that offers "2x" margin,you can effectively buy:

Accepted Answer

A)  $200 worth of stocks.
B)  $1,000 worth of stocks.
C)  $100 worth of stocks.
D)  $2,000 worth of stocks.E) All of the above
F) B) and D)

Question 18

A margin call is when:

Accepted Answer

A)  it looks like you are in danger of running through your money,and your broker forces you to sell your stock and use the money to pay back your loan.
B)  the market reaches a tipping point,and the financial bubble bursts.
C)  prices on future values of a stock are forecasted to be lower than current prices.
D)  prices on future values of a stock are forecasted to be higher than current prices.E) C) and D)
F) B) and C)

Question 19

As a result of the housing-market crash:

Accepted Answer

A)  both aggregate demand and aggregate supply shifted to the left.
B)  both aggregate demand and aggregate supply shifted to the right.
C)  aggregate demand shifted to the left,and aggregate supply shifted to the right.
D)  aggregate demand shifted to the right,and aggregate supply shifted to the left.E) A) and B)
F) B) and D)

Question 20

The widespread fall in the prices of homes caused consumers to:

Accepted Answer

A)  decrease their spending,as they struggled to pay back debt.
B)  increase their spending,as they devoted their money to things other than homes.
C)  decrease their spending,and increase national savings.
D)  increase their spending,as saving was viewed as a bad investment.E) All of the above
F) B) and C)

Exam 33: Financial Crisis

Foreclosure is:

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The introduction of the practice of securitization allowed:

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When the housing market bubble burst,many people found that:

Correct AnswerverifiedShow Answer

One reason the housing bubble occurred is because:

Correct AnswerverifiedShow Answer

In response to the financial crisis which followed the housing bubble collapse,policy-makers feared stimulating demand first would cause:

Correct AnswerverifiedShow Answer

If you lost 50 percent on $100 worth of stock in a 3x margin account,then you would lose:

Correct AnswerverifiedShow Answer

If you have $100 in an account that offers "2x" margin,you can effectively buy:

Correct AnswerverifiedShow Answer

The widespread fall in the prices of homes caused consumers to:

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As a result of the housing market crash overall output fell,and prices:

Correct AnswerverifiedShow Answer

The recency effect is:

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Debt service is the percent of:

Correct AnswerverifiedShow Answer

As a result of the housing-market crash:

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A margin call is when:

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Banks that were so large in terms of assets or customers,or so historically important,that banking regulators allowed the bank to keep operating despite insolvency after the housing market crash were called:

Correct AnswerverifiedShow Answer

The reforms introduced by Congress in the 1930s led to:

Correct AnswerverifiedShow Answer

The decrease in investment that occurred as a result of banks being unwilling to lend to businesses after the collapse of the housing bubble caused:

Correct AnswerverifiedShow Answer

Stock markets in England were started in:

Correct AnswerverifiedShow Answer

The investors who bought mortgage-backed securities just before the housing bubble burst:

Correct AnswerverifiedShow Answer

Leverage:

Correct AnswerverifiedShow Answer

The percent of disposable income that consumers have to spend to pay their debt is called:

Correct AnswerverifiedShow Answer

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