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| 1 | The Great Moderation is characterized by the combination of sustained economic growth and declining inflation. |
 | A) | True |
| B) | False |
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| 2 | The Great Depression occurred in the US in 2007. |
| A) | True |
| B) | False |
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| 3 | On 15 September 2008, Lehman Brothers failed and was taken over by JP Morgan Chase with the help of the US Treasury. |
| A) | True |
| B) | False |
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| 4 | At the beginning of the crisis, when the US housing market tumbled, private banks kept assuring their mutual lending and thus find at least the cash they needed for routine daily operations. |
| A) | True |
| B) | False |
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| 5 | Thanks to joint efforts of the ECB and the FED, information asymmetry problems were not critical in 2008. |
| A) | True |
| B) | False |
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| 6 | In 2008, house price bubbles occurred in Europe, especially in Ireland, Spain and UK. |
| A) | True |
| B) | False |
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| 7 | Self-fulfilling prophecies mean that if the market worry about a crisis, the crisis will happen. |
| A) | True |
| B) | False |
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| 8 | Country bailouts are allowed by European Treaties. |
| A) | True |
| B) | False |
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| 9 | Primary missions of the ECB have prevented it to intervene during the recent financial crisis. |
| A) | True |
| B) | False |
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| 10 | The ESFS does not make grants: it only lends with interest. |
| A) | True |
| B) | False |
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| 11 | European policy responses to the crises have prevailed intergovernmentalism over the community principle. |
| A) | True |
| B) | False |
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| 12 | The traditional role of banks is: |
| A) | collecting deposits and making loans |
| B) | investing in long-term financial assets |
| C) | investing in short-term financial assets |
| D) | All of the above. |
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| 13 | During the period 2000-2007, housing prices in the US |
| A) | kept decreasing |
| B) | kept rising |
| C) | were constant |
| D) | rose and fell alternatively |
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| 14 | The principle of diversification states that |
| A) | lumping together loans and then subdividing the package into tranches yield higher returns |
| B) | private banks must keep a fraction of their deposits as reserves |
| C) | a large portfolio of assets is safer than the individual loans it contains |
| D) | investors typically prefer less risky projects |
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| 15 | Large financial institutions are called ‘systemic’ because |
| A) | their failure can drag the whole financial system and the economy into a crisis. |
| B) | they all act the same way so if one decide not to lend to a country, all the others will do the same. |
| C) | they act suddenly such that it is not possible to predict their behavior in the short-run. |
| D) | All of the above. |
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| 16 | Bailing out banks and implementing large expansionary policies contributed to increase …. and fostered countries’… |
| A) | economic output; public budget |
| B) | uncertainty; vulnerability to systemic shocks |
| C) | asymmetry information problems; uncertainty |
| D) | public deficit; public debt. |
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| 17 | Which of following elements did not make markets start worry about the Greek debt? |
| A) | the discovery of past hidden debt. |
| B) | the deterioration of public finances. |
| C) | a house market bubble in Greece. |
| D) | the threat that if all markets participants worry, the Greek government could have to pay higher interest rate making the cost of serving the debt increase |
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| 18 | In May 2010, the European Council decided a joint rescue operation. Which of the following institutions was not involved in this operation? |
| A) | IMF |
| B) | WTO |
| C) | European Union |
| D) | ECB |
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| 19 | The joint rescue operation decided in Europe in May 2010 was called |
| A) | Troika |
| B) | EFSF |
| C) | PSI |
| D) | Stress-test |
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| 20 | The co-organized emergency lending for Greece was subject to stiff conditions. Which of the following measures is not one of them? |
| A) | Cuts in public expenditures. |
| B) | Tax increases. |
| C) | Nationalization of major financial companies. |
| D) | Reduction of the size of the civil service. |
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| 21 | The World’s highest public debt is in |
| A) | Greece. |
| B) | the US. |
| C) | Japan. |
| D) | Russia. |
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| 22 | The procedure for a country to leave the Eurozone has been established by |
| A) | the Maastricht Treaty |
| B) | the Amsterdam Treaty |
| C) | the Lisbon Treaty |
| D) | None of the above. There is no legal procedure for a country to leave. |
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| 23 | Central banks are lenders of last resort because |
| A) | they must borrow to acquire emergency funds. |
| B) | they can instantly create as much money as needed for emergency interventions. |
| C) | they are legally not allowed to intervene to help countries. |
| D) | national governments must be the first to intervene to help other countries. |
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| 24 | Subprime loans were disseminated throughout the banking system through the process of |
| A) | diversification |
| B) | dissemination |
| C) | securization |
| D) | deregulation |
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| 25 | The struggle between monetary and fiscal authorities over dominance has been compared to a game of chicken – who will blink first. Insert the words, monetary, fiscal, central bank and government where appropriate in the following sentences.
If it is the , which cuts its deficit, this is a case of dominance. If the blinks first and provides cash to the strapped , dominance leads to runaway inflation. |