Weekly Review Quiz as of 2008-07-17 Economics: Macro

Treasury and Fed Pledge Aid For Ailing Mortgage Giants by James R. Hagerty, Deborah Solomon and Sudeep Reddy 07/14/2008 http://online.wsj.com/article/SB121597057216549037.html

1. The government's plan to shore up confidence in Fannie Mae and Freddie Mac calls for a) a temporary increase in the Treasury's line of credit to the two companies. b) granting the Treasury temporary authority to buy equity in the two companies if needed. c) a provision to give the Federal Reserve a consultative role in setting capital requirements for the two companies. d) the New York Fed to lend directly to the two companies if necessary. * e) all of the above.

Crisis Deepens as Big Bank Fails by Damian Palette and David Enrich 07/12/2008 http://online.wsj.com/article/SB121581435073947103.html

2. IndyMac Bank failed because it specialized in a) loans to corn farmers who have been hurt by floods in the Midwest. b) financing imports which have decreased as the dollar has depreciated. * c) Atl-A loans to borrowers who do not fully document their income and assets. d) Alt-B loans to borrowers who do not qualify for fixed-rate Alt-A loans. e) loans to borrowers in regions of the country that have been hardest hit by falling home values.

Europe's Economy Takes A Hit by Marcus Walker, Joellen Perry and Jonathan House 07/16/2008 http://online.wsj.com/article/SB121614579356955235.html

3. At its last meeting, the Federal Reserve decided to ______. At its last meeting the ECB decided to ______. a) raise rates; raise rates b) lower rates; lower rates c) raise rates; lower rates d) lower rates; raise rates * e) keep rates unchanged; raise rates

Past Crises Suggest More Waves of Pain by Jon Hilsenrath and Mark Gongloff 07/14/2008 http://online.wsj.com/article/SB121599829296649887.html 4. According to University of Chicago professor Douglas Diamond, a) losses would be much larger if the government allowed the whole system to melt down. * b) if the government bails out troubled firms, the losses will be greater than if they allowed the whole system to melt down. c) the government should intervene by selling oil from the strategic petroleum reserves. d) if the government continues to bail out firms, the recovery will be quick. e) the housing crisis is over and the economy is expected to recover by the end of the year.

U.S. Consumers Trade Down As Economic Angst Grows by Gary McWilliams 07/11/2008 http://online.wsj.com/article/SB121573829143444631.html

5. In June, discount store sales ______and full-price department store sales ______a) declined; declined b) increased; increased * c) increased; declined d) declined; increased e) were unchanged; increased