EC 250 Final Exam - Questions and Answers (Complete Solutions)

EC 250 Final Exam - Questions and Answers (Complete Solutions)

1. Which two variables fell as much in the current recession as in the Great Recession?
a) output and inflation
b) output and employment
c) inflation and foreign trade
d) unemployment and foreign trade
2. During the current recession, the unusual thing that happened in the labour market was that
a) both employment and average earnings fell
b) both employment and average earnings increased
c) employment increased but average earnings fell
d) employment fell but average earnings increased
3. Generally speaking, output decline in the current recession was greater than in the Great Recession. The biggest
difference was in the output of
a) goods producing industries, which barely fell in the Great Recession and declined 15% in the current
recession
b) service producing industries, which barely fell in the Great Recession and declined 15% in the
current recession
c) public sector output, which barely fell in the Great Recession and declined 15% in the current
recession
d) retail trade, which barely fell in the Great Recession and declined 15% in the current recession
4. Prime mortgages
a) Are given to borrowers in their prime (age)
b) Are given for houses built on prime land
c) Have a lower interest rate than sub-prime loans
d) Have a higher interest rate than sub-prime loans
5. Lehman Brothers collapsed because
a) It borrowed in the short-term market and invested in real estate
b) It did not obtain a loan from the Federal Reserve
c) It was unable to quickly sell its real estate holdings
d) All of the above
6. A household buys a house and borrows 75% of the purchase price. Its leverage is
a) 1
b) 4
c) 7.5
d) 0.75
7. The increase in house prices in the US
a) Was a bubble, because subsequently house prices fell
b) Was not justified by fundamentals
c) Could have been due to improvements in the financial system
d) Was considered a bubble by the policymakers, who raised interest rates to stop it