The us economy recovered from the 2001 recession

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Foundations of Business
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Chapter 1 / Exercise 017
Foundations of Business
Hughes/Pride
Expert Verified
406.The U.S. economy recovered from the 2001 recession primarily because low interest rates caused a boom in the housing market.A)TrueB)False407.Subprime lending takes place at below-prime interest rates.A)TrueB)False408.In securitization a pool of loans is assembled and shares of that pool are sold to investors.A)TrueB)False409.Shares in the pools of securitized mortgages proved to be very safe investments, since large numbers of defaults on mortgages did not occur at the same time.A)TrueB)False410.Most of the subprime loans were made by loan originators, who sold the loans to other investors for securitization.A)TrueB)FalsePage 67
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Foundations of Business
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Chapter 1 / Exercise 017
Foundations of Business
Hughes/Pride
Expert Verified
411.The TED spread is the interest rate that banks pay when they borrow reserves from the Fed or another bank.A)TrueB)False412.A high TED spread means that banks expect they are taking on a high level of risk when they lend to each other.A)TrueB)False413.When the government injected capital into banks during the 2008 financial crisis, it was buying bonds issued by the troubled banks.A)TrueB)False414.During the financial crisis of 2008, the Treasury Department prevented the failure of BearStearns investment bank and AIG insurance company because they were considered too important to the economy to fail.A)TrueB)False415.The Wall Street Reform and Consumer Protection Act, also called Dodd-Frank, was passed in the 1930s to correct the problems that led to the Great Depression.A)TrueB)False416.The purpose of the Bureau of Consumer Financial Protection is to prevent exploitation of borrowers through complicated financial deals that were made to appear attractive to them.A)TrueB)False417.The Wall Street Reform and Consumer Protection Act established a government committee with the right to regulate “systemically important” nonbank financial institutions as if they were banks.A)TrueB)FalsePage 68
418.Explain how money adds to welfare although it does not directly produce anything.419.If professional basketball superstar LeBron James signed his jersey and gave it to you, it would certainly be a valuable asset. Why would this valuable asset not serve as a very good form of money if you took it to a shopping mall, looking to purchase a pair of shoes? Use the three roles of money in your explanation.420.Using gold as an example, what is the difference between commodity money and commodity-backed money?421.It's your birthday, and your uncle opens up his wallet and gives you a $20 bill. You take the $20 and deposit it in your checking account. What is the effect of this transaction on M1 or M2? Explain.422.It's your birthday, and your uncle opens up his wallet and gives you a $20 gift card to the local movie theater. You take the $20 gift card and use it to watch a movie and buy some popcorn and soda. What is the effect of this transaction on M1 or M2? Explain.

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