Question 1

What is the sub-prime market?

Accepted Answer

The sub-prime market represents those po...

Question 2

Sovereign debt refers to the bonds issued by national governments to:

Accepted Answer

A)   to increase returns.
B)   finance expenditure
C)   print money.
D)   to reduce debt.E) B) and C)
F) A) and D)

Question 3

The main purpose of financial regulation is to:

Accepted Answer

A)   Penalize risk averse fund managers in financial institutions.
B)   Ensure monetary policy is carried out in accordance with the Taylor Rule.
C)   Create efficiency and equity in financial markets.
D)   Monitor the remuneration packages of senior banking officials.E) All of the above
F) None of the above

Question 4

The _____________ is that part of the economy associated with the buying and selling of assets on financial markets.

Accepted Answer

A)   flat economy
B)   shadow economy.
C)   real economy
D)   financial economyE) C) and D)
F) A) and B)

Question 5

An economic bubble refers to when prices of assets and securities rise way above their true or fundamental value.

Accepted Answer

A) True 
 B)False

Question 6

Suppose that the government goes into deficit in order to help local school districts build better schools. Would this deficit be a burden on future generations?

Accepted Answer

The benefits of the project accrue not j...

Question 7

Which is NOT a peripheral country within the eurozone?

Accepted Answer

A)   Ireland
B)   Germany
C)   Latvia
D)   PortugalE) B) and D)
F) B) and C)

Question 8

Discuss some of the arguments for more austerity in the eurozone?

Accepted Answer

European members states must take steps ...

Question 9

An economic bubble is when:

Accepted Answer

A)   Prices of assets and securities fall below their true or fundamental value.
B)   Prices of assets and securities rise way above their true or fundamental value.
C)   Prices of assets and securities are at their true or fundamental value.
D)   Prices of assets and securities rise with inflation.E) B) and C)
F) A) and D)

Question 10

Is it possible that deficits do not burden future generations?

Accepted Answer

Some programs, such as Social Security, ...

Question 11

The real economy refers to that part of the economy which is concerned with the production of

Accepted Answer

A)   stocks and bonds.
B)   Interest rates.
C)   goods and services.
D)   equity.E) A) and B)
F) All of the above

Question 12

The idea of a bank being 'too big to fail' means:

Accepted Answer

A)   It has such a large asset base that its risk of failure is eliminated.
B)   Banks become more risk seeking because they believe they will be rescued if they fail.
C)   A lack of competition in financial markets which increases risk aversion.
D)   A reduced likelihood of adverse selection in financial markets.E) C) and D)
F) None of the above

Question 13

What theory states that problems in financial markets can amplify shocks to the real economy and create a feedback loop, which exacerbates economic problems?

Accepted Answer

A)   financial causal theory
B)   financial simulation theory
C)   financial accelerator theory
D)   all of the aboveE) None of the above
F) A) and C)

Question 14

The output gap refers to:

Accepted Answer

A)   The difference between current output and trend output.
B)   The size of a structural deficit.
C)   The difference between economic growth and the level of inflation.
D)   The difference between the natural rate of unemployment and the claimant count.E) A) and D)
F) None of the above

Question 15

In a financial crisis, central banks will loosen monetary policy to prevent the crisis getting out of control.

Accepted Answer

A) True 
 B)False

Question 16

De-regulated financial markets mean that:

Accepted Answer

A)   Financial institutions can trade globally.
B)   Financial institutions have more freedom to innovate.
C)   Credit is much easier for the average person.
D)   All of the above.E) A) and B)
F) C) and D)

Question 17

A sign that the 2007-09 global economic crisis was affecting the real economy was:

Accepted Answer

A)   the collapse of the housing market.
B)   An increase in the availability of credit.
C)   Consumer spending increased on goods with a high-income elasticity of demand.
D)   Increased borrowing.E) None of the above
F) B) and C)

Question 18

A cyclical deficit occurs where government income and expenditure:

Accepted Answer

A)   Deviate from a trend path.
B)   Occur normally over the economic cycle.
C)   Move in coordinated ways.
D)   Increase and decrease in a predictable manner over the economic cycle.
E)   Is disrupted by the normal economic cycle.F) None of the above
G) A) and B)

Question 19

Sovereign deficits are financed by

Accepted Answer

A)   Governments printing money.
B)   Governments issuing shares.
C)   Governments borrowing by issuing bonds.
D)   Governments paying off their debts.E) B) and C)
F) A) and B)

Question 20

Deregulation refers to the rules placed on banks to reduce the risks involved in lending.

Accepted Answer

A) True 
 B)False

Exam 38: The Financial Crisis and Sovereign Debt

The _____________ is that part of the economy associated with the buying and selling of assets on financial markets.

Correct AnswerverifiedShow Answer

Suppose that the government goes into deficit in order to help local school districts build better schools. Would this deficit be a burden on future generations?

Correct AnswerverifiedThe benefits of the project accrue not j...View AnswerShow Answer

The idea of a bank being 'too big to fail' means:

Correct AnswerverifiedShow Answer

Discuss some of the arguments for more austerity in the eurozone?

Correct AnswerverifiedEuropean members states must take steps ...View AnswerShow Answer

An economic bubble refers to when prices of assets and securities rise way above their true or fundamental value.

Correct AnswerverifiedShow Answer

What theory states that problems in financial markets can amplify shocks to the real economy and create a feedback loop, which exacerbates economic problems?

Correct AnswerverifiedShow Answer

De-regulated financial markets mean that:

Correct AnswerverifiedShow Answer

What is the sub-prime market?

Correct AnswerverifiedThe sub-prime market represents those po...View AnswerShow Answer

Deregulation refers to the rules placed on banks to reduce the risks involved in lending.

Correct AnswerverifiedShow Answer

Is it possible that deficits do not burden future generations?

Correct AnswerverifiedSome programs, such as Social Security, ...View AnswerShow Answer

The main purpose of financial regulation is to:

Correct AnswerverifiedShow Answer

A cyclical deficit occurs where government income and expenditure:

Correct AnswerverifiedShow Answer

Sovereign debt refers to the bonds issued by national governments to:

Correct AnswerverifiedShow Answer

Sovereign deficits are financed by

Correct AnswerverifiedShow Answer

An economic bubble is when:

Correct AnswerverifiedShow Answer

The real economy refers to that part of the economy which is concerned with the production of

Correct AnswerverifiedShow Answer

A sign that the 2007-09 global economic crisis was affecting the real economy was:

Correct AnswerverifiedShow Answer

In a financial crisis, central banks will loosen monetary policy to prevent the crisis getting out of control.

Correct AnswerverifiedShow Answer

Which is NOT a peripheral country within the eurozone?

Correct AnswerverifiedShow Answer

The output gap refers to:

Correct AnswerverifiedShow Answer

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The benefits of the project accrue not j...
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European members states must take steps ...
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The sub-prime market represents those po...
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Correct Answer
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Correct Answer
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Some programs, such as Social Security, ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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