What unusual policy actions did the Fed take during the Financial Crisis of 2007-2009 that affected its balance sheet?
What will be an ideal response?
First, the Fed had purchased large amounts of mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac. Second, the Fed participated in actions to save the investment bank Bear Stearns and the insurance company AIG from bankruptcy, and securities related to those actions remained on the Fed's books. Third, the Fed had participated in liquidity swaps with foreign central banks and had accumulated assets related to those swaps. Finally, the Fed had participated in a program to help the market for asset-backed securities, which are securitized loans backed by assets other than property.
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Mutually beneficial trade is possible when the terms of trade are
A. between the seller's and buyer's opportunity cost. B. above the seller's opportunity cost and above the buyer's opportunity cost. C. between the seller's and buyer's general behavior. D. below the seller's opportunity cost and above the buyer's opportunity cost.
In a circular-flow diagram, the saving and taxation "pipes" are carrying
A) injections to firms. B) injections to households. C) leakages from firms. D) leakages from households.
At one time, people in a certain country had no access to banks; they relied exclusively on currency. Then, a fractional-reserve banking system was created. As a result, the money supply
a. increased. The central bank could have reduced the size of this increase by buying bonds. b. increased. The central bank could have reduced the size of this increase by selling bonds. c. decreased. The central bank could have reduced the size of this decrease by buying bonds. d. decreased. The central bank could have reduced the size of this decrease by selling bonds.
When a firm chooses to shutdown, it is
A. making a good decision as long as the price it is getting is less than its average total costs. B. making a good decision as long as the price it is getting is less than its average variable costs. C. making a poor decision because it should always produce where marginal cost equals marginal revenue. D. making a poor decision because it should always produce where average costs exceed average revenue.