Macro Quiz

According to Ben Bernanke, rather than comparing the current COVID-19 economic situation to The Great Depression, we should compare it to? (select all that apply) A. A natural disaster B. Emergency Relief C. The Dot-com bubble D. The Great Recession E. None of these

A. A natural disaster B. Emergency Relief

What has the Federal Reserve done independently due to the impact of COVID-19? (Select all that apply) A. Cut interest rates to near zero B. Bring down borrowing costs C. Provide emergency lending to financial markets D. Provide stimulus checks E. All of the above

A. Cut interest rates to near zero B. Bring down borrowing costs C. Provide emergency lending to financial markets

States cannot run on a budget deficit, but they can hold implicit debt. What are potential benefits of a state holding implicit debt during the COVID-19 crisis? (Select all that apply) A. Increased investment spending B. Lower interest rates C. Decreased debt D. Increased demand E. None of the above

A. Increased investment spending D. Increased demand

In a healthy economy, growth should primarily be due to __________________ A. Increased spending due to increased income through employment B. Increased spending due to high levels of borrowing and very low interest rates C. Decreased employment D. Increased minimum wage E. Decreased purchasing power of the dollar

A. Increased spending due to increased income through employment

What are examples of Unconventional Monetary Policy Responses that have occurred in the COVID-19 Crisis? Select all that apply. A. Lending to Non-financial institutions B. Lending to financial institutions C. Quantitative Easing D. Targeting Interest Rates E. Targeting Tax Rates

A. Lending to Non-financial institutions C. Quantitative Easing

What market does Federal Reserve Chair Powell feel is the key market to watch? A. Mortgage market B. Bond market C. Lending market D. Commodities market

A. Mortgage market

Which of the following events is/are correctly paired with the actions of the Federal Reserve that caused them? (Select all that apply.) A. The Great Inflation: Maintaining low interest rates to support the vision of "The Great Society" B. The Great Moderation: Tight regulation of lenders C. The Great Depression: Maintaining the gold standard by lowering rates D. The Recession of 1981: A decrease in the money supply E. The bank panic of 1907: A sharp increase in interest rates

A. The Great Inflation: Maintaining low interest rates to support the vision of "The Great Society" D. The Recession of 1981: A decrease in the money supply

Which of the following are currently NOT anticipated outcomes of the Covid-19 economic response in the U.S.? (Select all that apply) A. The price of goods will rise due to less output and quantitative easing B. A V-Shaped economic recovery C. A low interest burden (low debt expenses for companies) D. The price of goods will decrease due to less consumer and firm borrowing and spending E. The Government will raise taxes to offset its accumulated debt

A. The price of goods will rise due to less output and quantitative easing B. A V-Shaped economic recovery E. The Government will raise taxes to offset its accumulated debt

Why do larger cities, such as New York, tend to restart their economy faster than more destitute places, such as Detroit, after a recession? (Select all that apply.) A. Their recovery tends to be a V-Curve while destitute locations remain at a L-curve. B. Larger cities are more vulnerable after an economic shock, leading businesses to have a better chance to restart. C. Larger cities have a larger labor market and therefore have more job opportunities. D. Rising housing costs in urban cities have allowed businesses to grow at a faster rate. E. Urban areas have attracted concentrated innovation where multiple industries can further grow.

A. Their recovery tends to be a V-Curve while destitute locations remain at a L-curve. C. Larger cities have a larger labor market and therefore have more job opportunities. E. Urban areas have attracted concentrated innovation where multiple industries can further grow.

Which of the following could have been done to possibly stop the 2008 market crisis? Select all that apply. A. Use of the Homeowner Ownership and Equity Protection Act by the Federal Reserve. B. People could have put down smaller down payments on their homes so they would have more savings when they walked away. C. Mortgage lenders/bankers/traders could have been more transparent and ethical about the quality of the loans in the securities/bonds. D. More strict mortgage underwriting guidelines. E. Continued investment into high-risk assets as they were becoming cheaper to invest in.

A. Use of the Homeowner Ownership and Equity Protection Act by the Federal Reserve. C. Mortgage lenders/bankers/traders could have been more transparent and ethical about the quality of the loans in the securities/bonds. D. More strict mortgage underwriting guidelines.

Which of the following economic scenarios represents a quick rebound in growth where business and consumer activity surges after a downturn? A. V-shaped B. U-shaped C. L-shaped D. A and B E. All of the above

A. V-shaped

1.) If lockdown ends relatively soon, what type of recovery will this lead to? A. V-shaped, because a short lockdown means that workers can keep relations with employers and return to work quickly B. U-shaped, because a short lockdown means only some employees can return to their old jobs, but most can not due to permanently severed from jobs. C. L-shaped, because a short lockdown means long-term unemployment since the majority of workers are permanently severed from their previous jobs D. A short lockdown will lead to both B and C E. We can not determine the kind of recovery that will occur if there is a short lockdown

A. V-shaped, because a short lockdown means that workers can keep relations with employers and return to work quickly

Which of the following economic events/trends will cause the economy to have a U or L shaped recovery? (Select all that apply) A. Workers are permanently severed from their jobs. B. Firms express confidence in global supply chains and quickly resume their use. C. Investment spending does not quickly bounce back. D. There is a slow recovery in consumer spending, even after people regain their jobs. E. Workers maintain the skills they need for their jobs.

A. Workers are permanently severed from their jobs. C. Investment spending does not quickly bounce back. D. There is a slow recovery in consumer spending, even after people regain their jobs.

Which conditions might contribute to a V-shaped recovery from the COVID-19 recession? (Select all that apply) A. Workers return quickly back to their previous jobs. B. Workers are permanently severed from their jobs. C. Firms' debt burdens are able to be paid off. D. Household spending increases. E. Unexpected inventory investment increases.

A. Workers return quickly back to their previous jobs. C. Firms' debt burdens are able to be paid off. D. Household spending increases.

What has the Fed been doing in order to move towards regaining maximum employment rates and previous price stability goals? Select all that apply A. enacting emergency lending powers to stabilize credit-giving channels B. safeguarding many essential financial markets used by households businesses and local governments C. inducing inflationary prices into the market D. buying millions of dollars worth of treasury bonds and mortgages E. lowering and maintaining interest rates at near 0%

A. enacting emergency lending powers to stabilize credit-giving channels B. safeguarding many essential financial markets used by households businesses and local governments D. buying millions of dollars worth of treasury bonds and mortgages E. lowering and maintaining interest rates at near 0%

In the Securitization video watched in class, the champagne bottle popping open represented the interest that was gained from the third parties buying the credit debt that was then redistributed according to the level of risk of the bonds. If the champagne bottle dried up, interest rates for the credit cards would ultimately blank and consumer spending would blank. A. increase; decrease B. increase; increase C. decrease; increase D. decrease; decrease E. increase; no change

A. increase; decrease

Which of the following are the primary objectives of the Federal Reserve? (Select all that apply) A. maximize sustainable employment B. stabilize prices C. sell bonds D. moderate long-term interest rates E. control the budget

A. maximize sustainable employment B. stabilize prices D. moderate long-term interest rates

What did the Fed lower interest rates to? A) 5% to 5.5% B) 0% to 0.25% C) 0.5% to 1% D) -0.25% to 0% E) 0.25% TO 0.5%

B) 0% to 0.25%

As lockdown due to the coronavirus extends and the hope for a V-shaped economic recovery shrinks, the Fed continues to respond to the health crisis using monetary policies to prevent an L-shaped recover. Which of the following policy responses are conventional? (select all that apply) A- Buying Mortgage Backed Securities B- Providing Dollar Liquidity to Banks C- Buying Long- Term Treasuries D- Targeting (cutting) Interest Rates E- Landing to Non-Financial Institutions

B- Providing Dollar Liquidity to Banks D- Targeting (cutting) Interest Rates

Which of the following contributed to the creation of the housing bubble? A. Low inflation B. A prolonged period of low interest rates C. Low demand for mortgages D. Expectations of high interest rates E. Regulatory policies from The Fed

B. A prolonged period of low interest rates

According to Ben Bernanke, what types of monetary policies did the Fed use in response to the COVID-19 pandemic? (Select all that apply)A. Enact a Rent Freeze B. Buy Treasury Bonds and Mortgage-Backed SecuritiesC. Open a Discount WindowD. Distribute Stimulus Checks to citizensE. Lower the Interest Rate

B. Buy Treasury Bonds and Mortgage-Backed Securities C. Open a Discount Window E. Lower the Interest Rate

Economists agree the most important factor, as of right now, to turning the economy around is: A. Implementing more monetary policies B. Controlling the health crisis and the virus itself C. Implementing more fiscal policies D. Lowering interest rates to allow for easier loaning E. Opening discount windows to firms to create liquidity

B. Controlling the health crisis and the virus itself

Which of the following could be/was done by the Fed to stabilize markets? A. Fed directly sending checks to households B. Fed engaging in bond-buying programs C. Increased Fed spending on unemployment insurance D. Fed raising interest rates E. Increased Fed spending on infrastructure

B. Fed engaging in bond-buying programs

Why did the Federal Reserve give funding to big banks instead of regulate their subprime mortgages in the years preceding 2008? A. The big banks were helping smaller banks establish themselves. B. If the big banks went bankrupt, they would take down the whole market. C. Banks such as Lehman Brothers were already properly regulated. D. The Fed did not yet have authority to regulate mortgage lenders early in the decade. E. The banks had not yet started giving away free loans.

B. If the big banks went bankrupt, they would take down the whole market.

Which of these is the most common Asset Backed Security? A. Credit Cards B. Mortages C. Student Loans D. Car Loans E. All are equally common

B. Mortages

Jerome Powell, the Federal Reserve Chair, has stated that the government has taken many steps to prevent a mortgage crisis that could potentially slow down economic recovery after COVID-19. Which of the following measures are included in these steps? (Select all that apply). A. Raising interest rates to increase money liquidity B. Providing a moratorium in the CARES Act on payments for some mortgage holders C. Putting all mortgage payments on pause until the economy is in better standing D. The Federal Reserve has bought many mortgage-backed securities E. Promoting lowering interest rates to many investment banks

B. Providing a moratorium in the CARES Act on payments for some mortgage holders D. The Federal Reserve has bought many mortgage-backed securities

What types of firms are MOST vulnerable to economic shocks, such as the one brought upon by COVID-19? A. Smaller and older firms B. Smaller and newer firms C. Larger and newer firms D. Larger and older firms E. All firms are equally vulnerable to economic shocks

B. Smaller and newer firms

Due to Covid-19 why are local and state government budgets in jeopardy? (Select all that apply) A. Local and state governments can run on a budget deficit B. Spending at the Local and State levels have increased C. Tax revenue has increased D. Tax revenue has decreased E. Local and state governments can not run on a budget deficit

B. Spending at the Local and State levels have increased D. Tax revenue has decreased E. Local and state governments can not run on a budget deficit

What happened to the U.S. dollar after Nixon mandated the abandoning the Bretton Woods system in 1971? A. The dollar increased in value over the next 10 years and saved the U.S. economy millions getting rid of an outdated system B. The dollar lost nearly half of its value over the next decade due to inflation, and the Fed chairman was reluctant to raise rates and prices and unemployment drastically increased. C. Nixon saved the economy and after one year the Bretton Woods system was reinstated back into law and is still what we use today. D. The dollar decreased in value over the next 10 years causing inflation and unemployment to decrease E. None of the above

B. The dollar lost nearly half of its value over the next decade due to inflation, and the Fed chairman was reluctant to raise rates and prices and unemployment drastically increased.

Which of the following reflects Greenspan's attitude toward Fed intervention around 2000? Select all that apply. A. Fed policy should be proactive. B. The government should rely on automatic stabilization. C. Gradually increase interest rates. D. Fed policy should be reactive. E. Wall Street investments signal prosperity, therefore the Fed should not interfere

B. The government should rely on automatic stabilization. D. Fed policy should be reactive. E. Wall Street investments signal prosperity, therefore the Fed should not interfere

Which of the following actions are the U.S. Government/Federal Reserve taking in order to lessen the negative effects of Covid-19 in the U.S. economy? (Select all that apply) A. increasing income and property taxes B. purchasing treasuries and mortgage backed securities C. decreasing money liquidity by raising interest rates D. increasing money liquidity by lowering interest rates E. issuing stimulus funds and automatic stabilizers

B. purchasing treasuries and mortgage backed securities D. increasing money liquidity by lowering interest rates E. issuing stimulus funds and automatic stabilizers

The economic experts from these videos, like Bernanke, are predicting a ___-shaped recovery because of _____________. A) V; the expected quick quick eradication of COVID-19. B) L; the inability of the global economy to ever be the same again. C) U; the reliance on the science community to solve the virus before any of the fiscal and monetary policies can become helpful. D) W; the volatility of the stock market.

C) U; the reliance on the science community to solve the virus before any of the fiscal and monetary policies can become helpful.

During the 2008 recession, why did the Federal Reserve allow the Lehman Brothers firm to collapse? Choose one A- They were the biggest firm on Wall Street B- They were under investigation for tax fraud C- The Fed thought that the economy would self correct D- The Fed thought they could not be saved E- The Fed had larger connections to other firms

C- The Fed thought that the economy would self correct

How did non financial corporations enter into this recession? A. In strong standing with little debt B. They had lots of capital and liquidity and are holding up well C. Entered with enormous debt loads from issuing corporate bonds D. Had high investment spending

C. Entered with enormous debt loads from issuing corporate bonds

While COVID-19 has greatly affected the size of the economy it has also affected the characteristics of inequality present in the economy as noted in the Brooking Institute's video about reopening the economy. Which of the following was NOT an interpretation of COVID-19 and economic inequality? A. Inequalities shape the health outcomes of COVID-19. B. COVID-19, a lethal pandemic, is one of 4 ruptures that flattens inequality. C. Inequalities do not shape the health outcomes of COVID-19. D. COVID-19 has magnified issues about inequality like an x-ray machine. E. COVID-19 will exploit inequality between death rate differences in workers versus the privileged.

C. Inequalities do not shape the health outcomes of COVID-19.

Which of the following statements best explain why mortgage refinance rates are at an all-time high. (Select all that apply) A. Quantitative Easing has led to a larger availability of funds for homeowners B. Stimulus checks and similar discretionary fiscal polices has led to homeowners wanting to adjust their mortgage payments. C. Interest rates have been cut to zero. D. Due to the circumstances, homeowners are pulling equity out of their own home to pay off debts and have extra funds on hand. E. Introduced loan programs, such as the Main Street Lending Program, will stimulate the economy, calling for homeowners to want to adjust their mortgage off this assumption.

C. Interest rates have been cut to zero. D. Due to the circumstances, homeowners are pulling equity out of their own home to pay off debts and have extra funds on hand.

The Federal Reserve has employed many tools to help the economy stay healthy due to the coronavirus pandemic. What will the plan of action be to transition away from these temporary monetary policies and use of tools? (Select the best answer.) A. Pull out the measures all at once in an effort to let the economy fix itself B. Keep the measures until a set date in September 2020 where they will then be pulled out C. Pull out gradually depending on the economy's path to recovery, making sure the economy is on solid footing D. Gradual moves that aren't announced beforehand so that banks have a slight advantage E. Start to pull out measures as soon as the end of May and gradually cease policies until the global health crisis is over

C. Pull out gradually depending on the economy's path to recovery, making sure the economy is on solid footing

In 2008, there was a global economic downturn that devastated world financial markets as well as the banking and real estate industries. This economic recession is known as the Great Recession. Which was the one of the leading causes of this downturn in the United States? A. The gold standard B. National disaster conditions that led to a need for government intervention C. Subprime mortgage crisis leading to the collapse of the housing bubble D. Banking panic and monetary contradiction E. Inconsistent oil exports from Iran that led to a rise in prices and tightening of monetary policy

C. Subprime mortgage crisis leading to the collapse of the housing bubble

In the history of the Federal Reserve, which of the following has had the most influence on monetary policy decisions? A. The federal government B. Opinions of the general public C. The chairman of the Federal Reserve D. Large corporations E. The market economy

C. The chairman of the Federal Reserve

Why is the economic impacts due to the Coronavirus better compared to impacts of a natural disaster as opposed to The Great Depression? A. The Federal Reserve didn't exist during the Great Depression. B. At the time of The Great Depression, it was difficult to track short-term changes in GDP and unemployment, whereas now this metrics are easily calculated. C. Unlike the Great Depression, the economic impacts of COVID-19 are not "man-made", making the CARES act more akin to emergency relief funding. D. During the Great Depression, interest rates were near 0, whereas in this crisis interest rates are at record high levels. E. The economic impacts of COVID-19 are felt across a variety of prices, whereas in The Great Depression price instability was contained to the Stock Market.

C. Unlike the Great Depression, the economic impacts of COVID-19 are not "man-made", making the CARES act more akin to emergency relief funding.

The Federal Reserve... (select all correct answers) A. is a part of the three branches of government. B. purposely increased interest rates during COVID-19. C. opened new lending facilities due to COVID-19 impacts. D. gets funds from buying treasury bonds in the open market. E. is connected directly to the treasury.

C. opened new lending facilities due to COVID-19 impacts. D. gets funds from buying treasury bonds in the open market.

Which of the following was not described to be a type of policy that the Fed is trying to use to respond to the COVID-19 economic crisis? A.) Providing short-term lending to the financial system B.) Put interest rates to zero C.) Reduce the aggregate price level D.) Providing loans to different types of businesses E.) Trying to quickly open small businesses so they can begin to earn money again

C.) Reduce the aggregate price level

Which of the following is NOT an example of an asset for commercial banks? A. Reserves B. Treasury bonds C. Loans D. Deposits E. Mortgage-backed securities

D. Deposits

Although first and second quarter data have not already been released for the United States' GDP, many economists believe we are entering into a recession. Which of the following did not have a direct impact on this economic downturn? A. Mass layoffs in the restaurant and travel industries. B. Decreased consumer demand of goods. C. The shutdown of several American factories. D. Internal instability in the financial system prior to the pandemic. E. Government-enforced social distancing.

D. Internal instability in the financial system prior to the pandemic.

Who was the president during the years 1971 and 1981, when the dollar lost more than half of its value? A. James Polk B. Jimmy Carter C. John F. Kennedy D. Calvin Coolidge E. Ronald Reagan

Jimmy Carter

What are the short-term effects of a zero interest-rate policy? a) increased savings b) lower borrowing costs c) lower consumer spending d) decreased inflation

b) lower borrowing costs

Covid-19 has caused many shocks to our economy. Which of the following shifts to the supply and demand curves have happened due to either government intervention or based on shocks from Covid-19. Check all that apply a. The supply curve shifts right b. The supply curve shifts left c. The demand curve shifts right, then left due to monetary policy d. The demand curve shifts right due to monetary policy e. The demand curve shifts left, then right due to monetary policy

b. The supply curve shifts left e. The demand curve shifts left, then right due to monetary policy

Due to COVID19, an increase in inflation (is/is not) inevitable because ... a) is; stocks and savings funds have become extremely volatile. b) is; the supply chain has been interrupted. c) is; interest rates have gone up. d) is not; both supply and demand have decreased drastically. e) is not; the supply chain has been interrupted.

d) is not; both supply and demand have decreased drastically.