The Global Financial Crisis: Causes, Consequences, and Impact

Question 1

What was the central role played by financial institutions in the unfolding of the crisis?

Accepted Answer

Both B and C

Answer

Providing financial advice and services to subprime borrowers

Answer

Securitizing and selling complex financial products

Answer

Failing to adequately assess and manage risk

Question 2

Which sector of the economy suffered a severe downturn during the crisis due to the collapse in consumer spending?

Accepted Answer

Retail and hospitality

Answer

Manufacturing

Answer

Services

Answer

Construction

Question 3

Credit default swaps played a significant role in the crisis. What is their primary function?

Accepted Answer

Insurance policies covering the risk of mortgage-backed securities failure

Answer

Bonds issued by banks to raise capital

Answer

Loans obtained by subprime borrowers

Answer

Derivatives enabling investors to speculate on the housing market

Question 4

Which nation suffered the most severe consequences of the Global Financial Crisis?

Accepted Answer

United States

Answer

United Kingdom

Answer

China

Answer

Japan

Question 5

The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted to address the crisis. What was its primary goal?

Accepted Answer

Strengthening financial regulation and protecting consumers

Answer

Providing financial assistance to banks

Answer

Promoting economic growth through financial policies

Answer

Nationalizing troubled financial institutions

Question 6

Define the term 'shadow banking system':

Accepted Answer

Financial institutions that operate beyond traditional regulatory frameworks

Answer

Institutions that provide credit to subprime borrowers

Answer

The network of interconnected financial entities

Answer

Government-controlled investment funds

Question 7

Who is widely recognized as a central figure in the lead-up to the Global Financial Crisis?

Accepted Answer

Alan Greenspan

Answer

Gordon Brown

Answer

Warren Buffett

Answer

David Cameron

Question 8

Describe the primary mechanism employed by central banks in response to the crisis, known as 'quantitative easing':

Accepted Answer

Buying large quantities of financial assets to increase money supply

Answer

Raising interest rates to curb inflation

Answer

Selling government bonds to raise revenue

Answer

Lowering banking reserve requirements

Question 9

Identify the characteristic of subprime mortgages:

Accepted Answer

High interest rates and flexible lending criteria

Answer

Fixed interest rates and extended repayment periods

Answer

Government guarantees and low risk

Answer

Generally obtained by high-income earners

Question 10

Examine the political consequences of the Global Financial Crisis. Discuss its impact on both domestic and international political landscapes.

Accepted Answer

Increased support for populist and far-right parties.

Accepted Answer

Weakened trust in international organizations like the IMF.

Accepted Answer

Globally, it led to increased protectionism and isolationism.

Answer

No significant impact on political systems or ideologies.

Question 11

Which of the following was a primary contributor to the Global Financial Crisis?

Accepted Answer

Low interest rates and loose monetary policy

Answer

Increased lending standards

Answer

Tight fiscal policy

Answer

High levels of consumer confidence

Question 12

Which regulatory failures significantly contributed to the Global Financial Crisis?

Accepted Answer

Insufficient supervision of financial institutions

Accepted Answer

Absence of regulations for the shadow banking sector

Accepted Answer

Inadequate collaboration among international regulators

Answer

Excessive government involvement in the financial sector

Question 13

Which of the following was a major factor in triggering the Global Financial Crisis?

Accepted Answer

Subprime mortgage lending

Answer

Fiscal stimulus

Answer

Technological innovation

Answer

Increased interest rates

Question 14

Who held the office of US President during the onset of the Global Financial Crisis?

Accepted Answer

George W. Bush

Answer

Barack Obama

Answer

Bill Clinton

Answer

Donald Trump

Question 15

Which of the following was NOT a significant consequence of the Global Financial Crisis?

Accepted Answer

Increased global economic growth

Answer

Recession in many countries

Answer

Bailouts of financial institutions

Answer

Job losses and unemployment

Question 16

What was the name of the US government program designed to address the crisis in the financial system?

Accepted Answer

Troubled Asset Relief Program (TARP)

Answer

Quantitative Easing (QE)

Answer

Federal Reserve Discount Window

Answer

Home Affordable Refinance Program (HARP)

Question 17

Which independent central bank played a crucial role in responding to the crisis in the United Kingdom?

Accepted Answer

Bank of England

Answer

International Monetary Fund

Answer

Federal Reserve

Answer

European Central Bank

Question 18

Which of the following is considered a long-term consequence of the Global Financial Crisis?

Accepted Answer

Increased economic inequality

Answer

Deficit reduction

Answer

Rapid economic growth

Answer

Increased government regulation

Question 19

What was a key policy response to the Global Financial Crisis implemented by central banks?

Accepted Answer

Interest rate cuts

Answer

Fiscal austerity

Answer

Tax increases

Answer

Quantitative tightening

Question 20

Which of the following is a criticism of the way the Global Financial Crisis was handled?

Accepted Answer

Inadequate regulation of the financial industry

Answer

Lack of coordination between central banks

Answer

Excessive government spending

Answer

Poor fiscal policy

Question 21

What is a key lesson learned from the Global Financial Crisis?

Accepted Answer

The importance of effective financial regulation

Answer

The benefits of deregulation

Answer

The inevitability of economic crises

Answer

The futility of government intervention