1. to prevent financial crisis, the central bank lowers the _______, which shoul
ID: 1222623 • Letter: 1
Question
1. to prevent financial crisis, the central bank lowers the _______, which should _______
A. target interest rate, raise aggregate expenditure B. inflation taget; increase the interest rate C. money supply; raise household confidence D. amount of money covered by deposit insurance; reduce moral hazard
2. The high ______ set by Central Bank of Argentina in the 1990s led to rapid ________ of the Argentine real rate and a _______ in net exports
A. tax rate; depreciation;rise
B. inflation target rate; appreciation;rise
C. money growth rate; depreciation;fall
D. nominal interest rate;appriciation ; fall
3. during the financial crisis, many borrowers defaulted on their loans and put many institutions at risk of failure. Policymakers could prevent failure by:
A. sellung their shares in the institution B. requiring the bank to reduce its reserve C. lending to the institution and purchasing its stock D. policymakers cannot prevent institutions from failing
4. Unnlike the financial crisis in the great depression in the 1920s and 1930s when the Fed ____, during the financial crisis of 2007-2009, the Fed ______
A. increased the money supply; reduced the money supply B. acted too late; acted too early C. reacted passively; reacted aggressively D. reacted agressively, reacted passively
5. To restrict risk taking by banks, regulators
A. Encourage banks to have deposite insurance B. enforce capial requirement C. guarante no interest loans to low-risk banks D. None of this answer is correct
Explanation / Answer
1. Option A iss correct.
When the economy is facing a financial crisis, lowering the interest rates could encourage the private investment in the economy because of which AD increases.
2. Option D is correct.
A high interest rates in the economy had led to increased capital inflows due to which the currency appreciated and the country's export became expensive relative to other countries because of which exports fell.
3. Option C is correct.
By lending to the institutions by buying thier shares would infuse money into the institutions which then would prevent the risk associated with the default.
4. Option A is correct.
During the financial crisis of 2007-08 the Fed reduced the amount of money supply in the economy which led to the situation of depression. This was not the case during 1920's crisis.
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