1. If the government guarantees not only the deposits but also the other liabili
ID: 1164421 • Letter: 1
Question
1. If the government guarantees not only the deposits but also the other liabilities of a failing bank, the government usually
a. merges it with the Federal Reserve.
b. closes the bank permanently.
c. temporarily takes over the bank but then reprivatizes it as soon as possible.
d. merges it with the Treasury.
2. The Dodd-Frank bill established the Consumer Financial Protection Bureau to help consumers understand the financial impact of Social Security. T/F
3. When private lenders learned the size of Greece's budget deficits and debt in 2009
a. promptly made loans to the Greek government to prevent a financial crisis.
b seized assets that belonged to the Greek government.
c refused to make further loans to Greece.
d nationalized banks and the manufacturing industry in Greece.
4. If the government guarantees liabilities of financial institutions other than deposits:
a. those financial institutions will have the incentive to engage in less risky behavior.
b. the Federal Reserve will be forced to raise reserve requirements.
c. those financial institutions will have the incentive to engage in overly risky behavior.
d. the economy will be pushed close to the zero bound on interest rates.
5. Fiscal stimulus is
a. expansionary fiscal policy, such as increases in government spending and tax cuts designed to reduce unemployment and increase output.
b. expansionary fiscal policy, such as increases in government spending and tax cuts designed to increase unemployment and decrease output.
Explanation / Answer
Q1. Option c .It reprivatises by selling to private investors
Q2. False: To protect consumers from Unscrupulous business practices by banks
Q3. Option d
Q4. Option c
Q5. Option a. Government engages in fiscal stimulus when the growth rate of economy declines. It is used to stimulate the economy so that the unemployment reduces and consumption increases.
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