Macro quiz 9

Which of the following was most involved in "securitizing" mortgage backed securities?

Fannie Mae and Freddie Mac

The incorrect fundamental assumption that contributed to the financial crisis in 2008 was:

Housing prices would always rise

Which of the following is TRUE about the life-cycle theory of savings?

People tend to borrow during the early years of their lifetimes, save during their prime working years, and dissave during their retirement years.

From where do investment banks get their funds?

Private investors

Which of the following is the correct answer?

Put it here - the answer is D

Which of the following can be defined as saving, according to economics?

Sandra purchases a certificate of deposit from a bank.

Which of the following is most important in determining the interest earned on a long term bond?

The coupon value of the bond

What was the fundementally flawed assumption at the heart of the 2006-2008 financial crisis?

The price of U.S. houses would continue to increase (or at least they would not decrease)

Crowding out occurs because the government increases the demand for loanable funds, drives up interest rates, and causes:

consumption and private investment to fall.

A leverage ratio is the ratio of:

debt to equity

Which of the following is NOT a reason for the financial crisis of 2007-2008?

excessive confidence about the stock market

A venture capitalist is someone who:

funds his or her stock market ventures with funds taken from the bond market

Securitization contributing to the Great Recession occurred in which market?

home mortgages

Bond prices and bond interest rates move:

in opposite directions.

The buyer of a bond is a:

lender

Financial intermediaries:

reduce the costs of moving savings from savers to borrowers and investors.

The process of bundling loans together and selling them on the market as financial assets is called:

securitization.

(Figure: Loanable Funds Market) Refer to the figure of the loanable funds market. At an interest rate of 3% in this market, there is a _____ of loanable funds of _____.

shortage; $320

According to modern monetary theory, increased government budget deficits:

will have little or no impact on the economy

Which of the following results when the Fed sells bonds?

Bond prices decrease and interest rates increase