Question 1

Df is:

Accepted Answer

A)   the demand for funds by governments.
B)   deposit- taking institutions.
C)   the extent to which domestic investment is not financed by domestic saving.
D)   current account deficit.E) A) and B)
F) B) and D)

Question 2

Which of the following factors boost the consumer confidence?

Accepted Answer

A)   Accumulating benefits in superannuation and pension funds.
B)   Increases in property values.
C)   Strong economic growth.
D)   All of the above.E) C) and D)
F) A) and B)

Question 3

Globalisation was created by:

Accepted Answer

A)   technological advances which allowed goods and information to be moved around the world more rapidly and cheaply.
B)   extensive financial deregulation.
C)   the removal of, or reduction in, trade barriers such as tariffs and quotas.
D)   all of the above.E) A) and C)
F) A) and B)

Question 4

The increase in consumer borrowing took the form of:

Accepted Answer

A)   equity release.
B)   credit cards.
C)   margin lending.
D)   all of the above.E) A) and B)
F) A) and C)

Question 5

The Crisis also led to a reduction in lending, which made it difficult for consumers and businesses to obtain loans to support their spending. This phenomenon is colloquially known as a:

Accepted Answer

A)   credit crunch.
B)   contagion.
C)   short lending.
D)   moral hazard.E) B) and C)
F) A) and D)

Question 6

___________occurs when the seller simply enters a contract to supply the share at an agreed price on a specified date.

Accepted Answer

A)   Naked short- selling
B)   Contagion
C)   Credit crunch
D)   Moral hazardE) A) and C)
F) A) and B)

Question 7

The fee paid on a CDS is equal to Probability of making a payment x Percentage loss in the event of a failure.

Accepted Answer

A) True 
 B)False

Question 8

US housing loans are made on the basis of a FICO score (named after Fair Isaacs and Company) which seeks to quantify the creditworthiness of a potential borrower.

Accepted Answer

A) True 
 B)False

Question 9

US lenders did not offer the Option ARM mortgages to their borrowers and as a result they could not repay.

Accepted Answer

A) True 
 B)False

Question 10

GFC is also referred to as the:

Accepted Answer

A)   Bank Crisis.
B)   American Financial Crisis.
C)   Asian Financial Crisis.
D)   Subprime Crisis.E) None of the above
F) C) and D)

Question 11

An indicator of the banks' shift to liquidity are the balances in the exchange settlement accounts (ESAs) with the RBA.

Accepted Answer

A) True 
 B)False

Question 12

A speculative bubble in an asset market:

Accepted Answer

A)   is usually short term in nature as it usually bursts.
B)   has a psychological basis; that is, it involves some irrationality on the part of investors.
C)   is a situation in which the price of the asset goes up in a way which is not justified by the fundamentals that normally determine the price of the asset.
D)   all of the above.E) All of the above
F) A) and D)

Question 13

Globalisation refers to:

Accepted Answer

A)   the removal of, or reduction in, trade barriers such as tariffs and quotas.
B)   extensive financial deregulation.
C)   the integration of national economies, especially their financial sectors, around the world.
D)   technological advances which allowed goods and information to be moved around the world more rapidly and cheaply.E) C) and D)
F) A) and B)

Question 14

Greenspan (2008) argues that the demand for repackaging of subprime mortgages was inexistent and could not have led to subprime lending.

Accepted Answer

A) True 
 B)False

Question 15

Bubbles always correct themselves. However, the process can destabilise the market and the economy as a whole.

Accepted Answer

A) True 
 B)False

Question 16

A number of governments, including the Australian Government, banned short- selling for a limited time during the GFC period.

Accepted Answer

A) True 
 B)False

Question 17

Describe a CDS.

Accepted Answer

A credit default swap (CDS) is a derivat...

Question 18

Credit rating agencies have been widely criticised following the emergence of the GFC.

Accepted Answer

A) True 
 B)False

Question 19

Irresponsible borrowing in the USA was also encouraged by low 'teaser' or 'honeymoon' rates which borrowers could not support when they were reset at higher levels.

Accepted Answer

A) True 
 B)False

Question 20

An advantage of a CDS is that it allows market participants to take a position on credit risk (i.e. by buying or selling them).

Accepted Answer

A) True 
 B)False

Exam 12: Global Financial Crisis

Globalisation refers to:

Correct AnswerverifiedShow Answer

US lenders did not offer the Option ARM mortgages to their borrowers and as a result they could not repay.

Correct AnswerverifiedShow Answer

Bubbles always correct themselves. However, the process can destabilise the market and the economy as a whole.

Correct AnswerverifiedShow Answer

Greenspan (2008) argues that the demand for repackaging of subprime mortgages was inexistent and could not have led to subprime lending.

Correct AnswerverifiedShow Answer

US housing loans are made on the basis of a FICO score (named after Fair Isaacs and Company) which seeks to quantify the creditworthiness of a potential borrower.

Correct AnswerverifiedShow Answer

The increase in consumer borrowing took the form of:

Correct AnswerverifiedShow Answer

Df is:

Correct AnswerverifiedShow Answer

A speculative bubble in an asset market:

Correct AnswerverifiedShow Answer

Irresponsible borrowing in the USA was also encouraged by low 'teaser' or 'honeymoon' rates which borrowers could not support when they were reset at higher levels.

Correct AnswerverifiedShow Answer

A number of governments, including the Australian Government, banned short- selling for a limited time during the GFC period.

Correct AnswerverifiedShow Answer

___________occurs when the seller simply enters a contract to supply the share at an agreed price on a specified date.

Correct AnswerverifiedShow Answer

The Crisis also led to a reduction in lending, which made it difficult for consumers and businesses to obtain loans to support their spending. This phenomenon is colloquially known as a:

Correct AnswerverifiedShow Answer

Globalisation was created by:

Correct AnswerverifiedShow Answer

Which of the following factors boost the consumer confidence?

Correct AnswerverifiedShow Answer

An indicator of the banks' shift to liquidity are the balances in the exchange settlement accounts (ESAs) with the RBA.

Correct AnswerverifiedShow Answer

An advantage of a CDS is that it allows market participants to take a position on credit risk (i.e. by buying or selling them).

Correct AnswerverifiedShow Answer

Credit rating agencies have been widely criticised following the emergence of the GFC.

Correct AnswerverifiedShow Answer

GFC is also referred to as the:

Correct AnswerverifiedShow Answer

Describe a CDS.

Correct AnswerverifiedA credit default swap (CDS) is a derivat...View AnswerShow Answer

The fee paid on a CDS is equal to Probability of making a payment x Percentage loss in the event of a failure.

Correct AnswerverifiedShow Answer

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A credit default swap (CDS) is a derivat...
View Answer

Correct Answer
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