SOLVED

11) The expectations channel of monetary transmission takes the view that ________. A) decreasing the federal funds rate will lead to a reduction in the discount rate. B) if economic agents believe that the price of an individual asset will rise in the future, they will buy that asset today, contributing to its eventual price increase. C) if households expect an increase in prices in the future, they will engage in spending today. D) households will increase their spending today if they believe that the monetary authorities are committed to maintaining low interest rates. 12) The most important component of the Economic Recovery Act passed by the Bush Administration was ________. A) the creation of the Federal Reserve discount window. B) the establishment of the Troubled Asset Relief Program (TARP). C) the decrease in taxes for the wealthiest one percent of all Americans. D) the creation of the Federal Reserve. 13) The Troubled Asset Relief Program ________. A) led to the creation of the Federal Reserve System. B) helped contribute to the stock market crash of 2006-2007. C) shifted non-performing assets off the balance sheet of the Federal Deposit Insurance Corporation onto the balance sheet of Fannie Mae and Freddie Mac. D) authorized the Treasury to by mortgages from troubled financial institutions. 14) The Economic Recovery Act of 2008 included a temporary increase in the federal deposit insurance ceiling from $100,000 to $250,000. The likely objective was to ________. A) boost bank profitability B) increase the money supply C) discourage withdrawals from banks D) bail out the Federal Deposit Insurance Corporation (FDIC) 15) Following the collapse of its housing and stock markets around 1990, the Japanese government ________. A) effectively managed the crisis, limiting the damage to the Japanese economy. B) took only limited action in response to the crisis. C) was able to rely on private initiatives in quickly reversing the course of GDP in the 1990s. D) fixed the value of the yen to the Euro and pursued an aggressive monetary policy. 16) Central bank lending to bail out troubled firms is known as ________, while allowing troubled firms to conceal the true value of their assets is called ________. A) crony capitalism; larceny B) liquidity provision; regulatory forbearance C) securitization; nonconventional monetary policy D) subprime lending; regulatory arbitrage 17) Compared to the central bank response to the financial crisis in 2007-2009, the response to the Great Depression of the 1930s may be characterized as ________, while the response of Japan’s central bank to the banking crisis in the early 1990s merits the label ________. A) hasty; sluggish B) intrusive; tenacious C) complacent; indulgent D) corrupt; technocratic 18) Why is responding to a financial crisis by bailing out financial institutions more effective than direct support of nonfinancial businesses? 19) How did international policy coordination contribute to the avoidance of an economic depression in 2008 – 2010? 20) What is meant by the expectations channel of monetary transmission? How does it relate to the credit channel?