d) are more attractive when interest rates on fixed mortgages fall.

d) are more attractive when interest rates on fixed mortgages fall.

SaveQuestion 2 (1 point)

Combating stagflation generally requires policymakers to _____ in order to reduce inflationary expectations.

Question 2 options:

a) increase aggregate demand

b) decrease short-run aggregate supply

c) increase short-run aggregate supply

d) decrease aggregate demand

SaveQuestion 3 (1 point)

If an account valued at $1,000 is leveraged 5:1, a 10% drop in the value of invested assets would cause the value of the account to decrease by:

Question 3 options:

a) $20.

b) $500.

c) $100.

d) $1,000.

SaveQuestion 4 (1 point)

Which of these was NOT a response by the government to mitigate the effects of the financial crisis?

Question 4 options:

a) It made large loans to the U.S. automobile industry.

b) It lent over $100 billion to Lehman Brothers to keep it from bankruptcy.

c) It passed a very large stimulus package to boost aggregate demand.

d) It engaged in quantitative easing programs to remove risky assets from bank balance sheets.

SaveQuestion 5 (1 point)

According to the Phillips curve, a rise in inflation would correspond to _____ while a rise in unemployment would correspond to _____.

Question 5 options:

a) an increase in unemployment; a decrease in inflation

b) a decrease in unemployment; an increase in inflation

c) an increase in unemployment; an increase in inflation

d) a decrease in unemployment; a decrease in inflation

SaveQuestion 6 (1 point)

Subprime mortgages were loans made to borrowers with _____ credit and who, as a result, were charged _____ interest rates.

Question 6 options:

a) poor; high

b) excellent; low

c) excellent; high

d) poor; low

SaveQuestion 7 (1 point)

The graph that shows the tradeoff between inflation and money wages is called the:

Question 7 options:

a) minimization curve.

b) Phillips curve.

c) employment line.

d) misery index.

SaveQuestion 8 (1 point)

Which of these did NOT contribute significantly to the financial crisis of 2008?

Question 8 options:

a) a large rise in home foreclosures

b) weak enforcement of lending standards that resulted in many risky loans

c) bond rating agencies assigning very low ratings to mortgage-backed securities

d) excessive leveraging and issuance of credit default swaps

SaveQuestion 9 (1 point)

The United States underwent _____ throughout most of 2009.

Question 9 options:

a) disinflation

b) moderate inflation

c) stable prices

d) deflation

SaveQuestion 10 (1 point)

If inflation is 3% but wages rise by 5% and there are no additional inflationary expectations, what is the rate of increase in labor productivity?

Question 10 options:

a) 2%

b) 3%

c) 8%

d) 5%

SaveQuestion 11 (1 point)

Some analysts blame the financial crisis of 2007-2009 on Federal Reserve policy. They argue that:

Question 11 options:

a) low interest rates encouraged excessive mortgage borrowing, leading to the housing bubble.

b) the Fed securitized the mortgages into collateralized debt obligations and encouraged excessive risk taking.

c) a restrictive policy lowered aggregate demand and GDP.

d) the Fed did not adequately regulate the mortgage market's credit standards for issuing loans as required by the Federal Reserve Act.

SaveQuestion 12 (1 point)

Which of these is a financial institution that sold credit default swaps insuring investors against securities defaults prior to the financial crisis in 2008?

Question 12 options:

a) Lehman Brothers

b) TARP

c) Bear Stearns

d) American International Group (AIG)

SaveQuestion 13 (1 point)

The recession of 2007-2009 was:

Question 13 options:

a) one of the shortest on record.

b) deeper than the recessions of 1990 and 2001.

c) longer and more severe than the Great Depression.

d) dissimilar to the Great Depression in that the financial sector was not involved.

SaveQuestion 14 (1 point)

The cost of financing the national debt (in terms of average interest rate paid on the debt) has generally _____ over the last 30 years.

Question 14 options:

a) stayed the same

b) fallen

c) fluctuated wildly

d) risen

SaveQuestion 15 (1 point)

One of the trigger points for the financial crisis of 2007-2009 was when:

Question 15 options:

a) the Federal Reserve started to raise short-term interest rates.

b) foreigners started to sell off their holdings of U.S. financial instruments.

c) the federal government started to engage in deficit spending.

d) interest rates on adjustable-rate mortgages were reset at a higher level.