Question 1

The U.S.Federal Reserve responded to the 2008 financial crisis in several ways.Which of the following is one of the ways the U.S.Federal Reserve responded?

Accepted Answer

The U.S. Federal Reserve implemented a program where it lent U.S. Treasury securities to investment banks in exchange for mortgage-backed securities to provide liquidity to the financial markets during the 2008 crisis.

Question 2

In October 2008, U.S.Congress passed the Troubled Asset Relief Program (TARP), under which the U.S.Treasury Department provided ________ to banks in exchange for ________.

Accepted Answer

TARP provided funds (money) to banks in exchange for stock (equity). This allowed the government to become a shareholder in the banks and potentially benefit from any future profits or growth.

Question 3

In 2008, the U.S.Treasury Department and U.S.Federal Reserve took several actions in response to the deepening financial crisis.One action was the U.S.Treasury Department's move to have the federal government take control of

Accepted Answer

In 2008, the U.S. Treasury Department placed Fannie Mae and Freddie Mac into conservatorship, effectively taking control of the two government-sponsored enterprises that play a critical role in the U.S. housing market. This move aimed to stabilize the financial system and prevent the collapse of these institutions, which had been struggling due to mounting losses from the subprime mortgage crisis.

Question 4

By the 2000s, an important market change occurred when U.S.investment banks became significant participants in the secondary market for

Accepted Answer

In the 2000s, investment banks such as Bear Stearns, Lehman Brothers, and Goldman Sachs became significant participants in the secondary market for mortgages, buying and selling mortgage-backed securities. This ultimately contributed to the subprime mortgage crisis in 2008.

Question 5

In March 2008, the U.S.Federal Reserve announced that primary dealers would be eligible to receive discount loans.

Accepted Answer

This statement is true. On March 16, 2008, the U.S. Federal Reserve announced that it had authorized discount window loans for primary dealers, in an effort to help ease liquidity pressures in the financial markets during the global financial crisis. This marked a significant expansion of the Federal Reserve's lending facilities, as previously only banks had been eligible for discount window loans.

Question 6

Firms that participate in regular open market transactions with ________ are called primary dealers.

Accepted Answer

Primary dealers are financial institutions that have an ongoing relationship with the Federal Reserve, particularly in the context of buying and selling government securities as part of the Federal Reserve's open market operations.

Question 7

In 2008, the U.S.Treasury Department and U.S.Federal Reserve took several actions in response to the deepening financial crisis.One action was the creation of the Term Securities Lending Facility, under which the U.S.Federal Reserve will loan up to $200 billion of treasury securities in exchange for

Accepted Answer

The Term Securities Lending Facility was created to improve liquidity in the securities market by allowing financial institutions to exchange mortgage-backed securities for U.S. Treasury securities, thus providing them with higher quality collateral.

Question 8

Despite saving Lehman Brothers from failing, the U.S.Federal Reserve and the U.S.Treasury Department decided to allow Bear Stearns to go bankrupt, which it did in September, 2008.

Accepted Answer

It was actually Bear Stearns that was saved by the Federal Reserve in March 2008, while Lehman Brothers was allowed to go bankrupt in September 2008.

Question 9

By the height of the U.S.housing bubble in 2005 and early 2006, lenders in the United States had greatly loosened the standards for obtaining a mortgage loan, with many mortgages being granted to sub-prime borrowers ________ and "Alt-A" borrowers ________.

Accepted Answer

The passage states that lenders loosened standards for obtaining a mortgage loan and granted many mortgages to sub-prime borrowers and "Alt-A" borrowers. The options that mention flawed credit histories and lack of documentation of income fit the description of sub-prime borrowers, as they often had lower credit scores and a higher risk of defaulting on their loans.

Question 10

The smaller the fraction of an investment financed by borrowing,

Accepted Answer

The smaller the fraction of an investment financed by borrowing, the smaller the potential loss on that investment. This is because borrowing increases the amount of money invested, which also increases the potential loss. Therefore, the less money borrowed, the smaller the potential loss. However, the potential return is not necessarily affected by the amount of borrowing, so it could be high or low regardless of the fraction of the investment financed by borrowing.

Question 11

A financial asset is considered ________ if it can be sold in a secondary market.

Accepted Answer

A financial asset that can be sold in a secondary market is considered a security. Securities include stocks, bonds, and other financial instruments that can be bought and sold on exchanges or over-the-counter markets.

Question 12

Assume you purchase an asset that cost 6000 and borrow 40 % of the cost from a wealthy relative. After a year the asset is worth 7800 . What is your rate of return on your investment?

Accepted Answer

The initial cost of the asset is $6000, and 40% of this cost, which is $2400, is borrowed. Therefore, the personal investment is $3600 ($6000 - $2400). After a year, the asset's value increases to $7800. The profit is $1800 ($7800 - $6000). The rate of return on the personal investment is calculated as (Profit / Personal Investment) * 100 = ($1800 / $3600) * 100 = 50%.

Question 13

If the amount you owe on your house is less than the price of the house, you have

Accepted Answer

Positive equity means that the value of the assets (in this case, the house) is greater than the amount of debt owed on it. So, if the amount owed on the house is less than the price of the house, you have positive equity in your house.

Question 14

By the 2000s, U.S.investment banks had become significant participants in the secondary market for mortgages.

Accepted Answer

This is true. By the 2000s, investment banks such as Lehman Brothers, Bear Stearns, and Goldman Sachs had become major players in the secondary market for mortgages, securitizing home loans and selling them to investors.

Question 15

The Bank of Canada, the Department of Finance, and the Office of the Superintendent of Financial Institutions are all alarmed by the high household debt to after-tax income ratio of Canadians and the overheated housing marked caused by

Accepted Answer

The low interest rates have made borrowing cheaper and more attractive, which has led Canadians to take on higher levels of debt. The Bank of Canada, Department of Finance, and Office of Superintendent of Financial Institutions are concerned about this as it could lead to financial instability if there is a housing market correction or an economic downturn.

Question 16

Although the U.S.Federal Reserve had traditionally made discount loans only to ________, in response to the financial crisis in 2008 the U.S.Federal Reserve made primary dealers eligible for discount loans as well.

Accepted Answer

Traditionally, the U.S. Federal Reserve made discount loans primarily to commercial banks to assist them in managing short-term liquidity needs. During the financial crisis in 2008, the Federal Reserve expanded this eligibility to include primary dealers, which are banks and financial institutions that trade government securities directly with the Federal Reserve, to help stabilize the financial system.

Question 17

In the following table, fill in the columns for your return on investment if the price of your house increases or decreases by 40 percent, based on the down payments specified in the first column.
Return on Your Investment From

Accepted Answer

The answer of In the following table, fill in the...

Question 18

Prior to 1970, mortgages were ________ resold in the secondary market.

Accepted Answer

Prior to 1970, mortgages were rarely resold in the secondary market. It wasn't until the creation of Fannie Mae and Freddie Mac, government-sponsored enterprises, that the secondary mortgage market gained momentum.

Question 19

To reassure investors who were unwilling to buy mortgages in the secondary market, the U.S.Congress used two government sponsored enterprises, ________, to sell bonds to investors and use the funds to purchase mortgages from banks.

Accepted Answer

The government sponsored enterprises that were used to sell bonds and purchase mortgages from banks were Fannie Mae and Freddie Mac.

Question 20

What is a mortgage? What were the important developments in the mortgage market during the years after 1970 in the United States?

Accepted Answer

The answer of What is a mortgage? What were the...

Quiz 11: Monetary Policy

The U.S.Federal Reserve responded to the 2008 financial crisis in several ways.Which of the following is one of the ways the U.S.Federal Reserve responded?

In October 2008, U.S.Congress passed the Troubled Asset Relief Program (TARP) , under which the U.S.Treasury Department provided to banks in exchange for .

In 2008, the U.S.Treasury Department and U.S.Federal Reserve took several actions in response to the deepening financial crisis.One action was the U.S.Treasury Department's move to have the federal government take control of

By the 2000s, an important market change occurred when U.S.investment banks became significant participants in the secondary market for

In March 2008, the U.S.Federal Reserve announced that primary dealers would be eligible to receive discount loans.

Firms that participate in regular open market transactions with ________ are called primary dealers.

In 2008, the U.S.Treasury Department and U.S.Federal Reserve took several actions in response to the deepening financial crisis.One action was the creation of the Term Securities Lending Facility, under which the U.S.Federal Reserve will loan up to $200 billion of treasury securities in exchange for

Despite saving Lehman Brothers from failing, the U.S.Federal Reserve and the U.S.Treasury Department decided to allow Bear Stearns to go bankrupt, which it did in September, 2008.

By the height of the U.S.housing bubble in 2005 and early 2006, lenders in the United States had greatly loosened the standards for obtaining a mortgage loan, with many mortgages being granted to sub-prime borrowers and "Alt-A" borrowers .

The smaller the fraction of an investment financed by borrowing,

A financial asset is considered ________ if it can be sold in a secondary market.

Assume you purchase an asset that cost 6000 and borrow 40 % of the cost from a wealthy relative. After a year the asset is worth 7800 . What is your rate of return on your investment?

If the amount you owe on your house is less than the price of the house, you have

By the 2000s, U.S.investment banks had become significant participants in the secondary market for mortgages.

The Bank of Canada, the Department of Finance, and the Office of the Superintendent of Financial Institutions are all alarmed by the high household debt to after-tax income ratio of Canadians and the overheated housing marked caused by

Although the U.S.Federal Reserve had traditionally made discount loans only to ________, in response to the financial crisis in 2008 the U.S.Federal Reserve made primary dealers eligible for discount loans as well.

In the following table, fill in the columns for your return on investment if the price of your house increases or decreases by 40 percent, based on the down payments specified in the first column. Return on Your Investment From

Prior to 1970, mortgages were ________ resold in the secondary market.

To reassure investors who were unwilling to buy mortgages in the secondary market, the U.S.Congress used two government sponsored enterprises, ________, to sell bonds to investors and use the funds to purchase mortgages from banks.

What is a mortgage? What were the important developments in the mortgage market during the years after 1970 in the United States?

Quiz 11: Monetary Policy

The U.S.Federal Reserve responded to the 2008 financial crisis in several ways.Which of the following is one of the ways the U.S.Federal Reserve responded?

In October 2008, U.S.Congress passed the Troubled Asset Relief Program (TARP) , under which the U.S.Treasury Department provided ________ to banks in exchange for ________.

In 2008, the U.S.Treasury Department and U.S.Federal Reserve took several actions in response to the deepening financial crisis.One action was the U.S.Treasury Department's move to have the federal government take control of

By the 2000s, an important market change occurred when U.S.investment banks became significant participants in the secondary market for

In March 2008, the U.S.Federal Reserve announced that primary dealers would be eligible to receive discount loans.

Firms that participate in regular open market transactions with ________ are called primary dealers.

Despite saving Lehman Brothers from failing, the U.S.Federal Reserve and the U.S.Treasury Department decided to allow Bear Stearns to go bankrupt, which it did in September, 2008.

By the height of the U.S.housing bubble in 2005 and early 2006, lenders in the United States had greatly loosened the standards for obtaining a mortgage loan, with many mortgages being granted to sub-prime borrowers ________ and "Alt-A" borrowers ________.

The smaller the fraction of an investment financed by borrowing,

A financial asset is considered ________ if it can be sold in a secondary market.

Assume you purchase an asset that cost 6000 and borrow 40 % of the cost from a wealthy relative. After a year the asset is worth 7800 . What is your rate of return on your investment?

If the amount you owe on your house is less than the price of the house, you have

By the 2000s, U.S.investment banks had become significant participants in the secondary market for mortgages.

The Bank of Canada, the Department of Finance, and the Office of the Superintendent of Financial Institutions are all alarmed by the high household debt to after-tax income ratio of Canadians and the overheated housing marked caused by

Although the U.S.Federal Reserve had traditionally made discount loans only to ________, in response to the financial crisis in 2008 the U.S.Federal Reserve made primary dealers eligible for discount loans as well.

In the following table, fill in the columns for your return on investment if the price of your house increases or decreases by 40 percent, based on the down payments specified in the first column. Return on Your Investment From

Prior to 1970, mortgages were ________ resold in the secondary market.

To reassure investors who were unwilling to buy mortgages in the secondary market, the U.S.Congress used two government sponsored enterprises, ________, to sell bonds to investors and use the funds to purchase mortgages from banks.

What is a mortgage? What were the important developments in the mortgage market during the years after 1970 in the United States?

In October 2008, U.S.Congress passed the Troubled Asset Relief Program (TARP) , under which the U.S.Treasury Department provided to banks in exchange for .

By the height of the U.S.housing bubble in 2005 and early 2006, lenders in the United States had greatly loosened the standards for obtaining a mortgage loan, with many mortgages being granted to sub-prime borrowers and "Alt-A" borrowers .