1. The purpose of the Dodd-Frank Wall Street Reform Act was to:
Select one:
a. encourage banks to engage in more risk-taking.
b. give banks the choice to report their holdings.
c. force banks to limit their risk-taking.
d. limit what stocks and mutual funds that investors could choose.
2. The Glass-Steagall Act was set up to:
Select one:
a. regulate financial institutions after the Savings and Loan Crisis the 1980s.
b. give the federal government the sole responsibility in carrying out fiscal policy to regulate the economy.
c. establish banking regulations and deposit insurance as a result of the 1930s crisis.
d. regulate the derivatives market as a result of the 2008 crisis.
3. Economists now believe that interest rates
Select one:
a. must be positive
b. can be negative, but only by a small amount
c. can be either negative or positive
d. must be negative
4.The efficient market hypothesis suggests that:
Select one:
a. while individuals can be irrational, collectively they will not.
b. because individuals are rational, collectively they are also rational.
c. irrationality must a part of every economic model.
d. asset price bubbles are efficient.
5. A bank that is liquid:
Select one:
a. has assets that can be readily converted into cash and money.
b. has sufficient assets to cover its long-term liabilities.
c. can sell short-term bonds to buy long-term bonds.
d. is diversified in its holdings of financial assets.
6. Negative interest rates
Select one:
a. can only exist if there is inflation
b. are impossible
c. mean that lenders pay borrowers for making a loan
d. mean that borrowers pay lenders for making a loan
7. When the Fed promised to hold the Fed funds rate close to zero until the end of 2014, it was:
Select one:
a. carrying out what’s known as operation twist.
b. carrying out what is known as credit easing.
c. following a precommitment policy.
d. following a policy that was recommended by Congress.
8. Having a pre-commitment strategy gives the Fed the ability to alter the Fed funds rate when needed.
Select one:
True
False
