Global Financial Crises MCQs

1. What triggered the Global Financial Crisis of 2007-2008? a) High oil prices b) Collapse of the housing market in the U.S. c) Trade wars d) Natural disasters Answer: b) Collapse of the housing market in the U.S. 2. Which institution is often considered the “lender of last resort” during financial crises? a) World Bank b) International Monetary Fund (IMF) c) Bank for International Settlements (BIS) d) European Central Bank (ECB) Answer: b) International Monetary Fund (IMF) 3. What is the term used to describe the practice of banks lending more money than they actually hold in reserves? a) Fractional reserve banking b) Full reserve banking c) Over-leveraging d) High-frequency trading Answer: a) Fractional reserve banking 4. Which financial instrument was primarily associated with the 2008 financial crisis due to its high risk? a) Treasury bonds b) Mortgage-backed securities c) Corporate bonds d) Government bonds Answer: b) Mortgage-backed securities 5. What was the primary cause of the Asian Financial Crisis of 1997? a) Currency devaluation b) Stock market collapse c) Banking sector failures d) High inflation Answer: a) Currency devaluation 6. Which country was the first to experience a major banking crisis during the 2007-2008 global financial crisis? a) Japan b) United Kingdom c) United States d) Greece Answer: c) United States 7. What role did credit default swaps (CDS) play in the 2008 financial crisis? a) They helped stabilize the market b) They were used to insure against defaults but exacerbated the crisis c) They were regulated to prevent risk d) They were primarily used for government securities Answer: b) They were used to insure against defaults but exacerbated the crisis 8. Which U.S. regulatory act was enacted in response to the 2008 financial crisis to improve financial regulation? a) Glass-Steagall Act b) Dodd-Frank Wall Street Reform and Consumer Protection Act c) Sarbanes-Oxley Act d) Gramm-Leach-Bliley Act Answer: b) Dodd-Frank Wall Street Reform and Consumer Protection Act 9. What is the term for the phenomenon where financial institutions become too big to fail? a) Moral hazard b) Systemic risk c) Too-big-to-fail d) Financial contagion Answer: c) Too-big-to-fail 10. Which global organization monitors and assesses global financial stability? a) World Trade Organization (WTO) b) International Monetary Fund (IMF) c) World Bank d) United Nations Answer: b) International Monetary Fund (IMF) 11. What term describes the widespread withdrawal of bank deposits due to fears of insolvency? a) Bank run b) Currency devaluation c) Capital flight d) Debt crisis Answer: a) Bank run 12. Which of the following is a common consequence of a financial crisis? a) Increased employment b) Economic recession c) Stable prices d) Rising stock markets Answer: b) Economic recession 13. What was the main cause of the European Sovereign Debt Crisis? a) Rising oil prices b) Excessive government debt and deficits c) Decline in tourism revenue d) Trade imbalances Answer: b) Excessive government debt and deficits 14. Which country was the epicenter of the 2010-2012 European Sovereign Debt Crisis? a) Italy b) Ireland c) Spain d) Greece Answer: d) Greece 15. What does the term “financial contagion” refer to? a) The spread of financial crises from one market or country to another b) The positive economic growth due to financial reforms c) The rise in consumer confidence d) The stabilization of financial markets Answer: a) The spread of financial crises from one market or country to another 16. Which of the following is a key measure often taken to combat a financial crisis? a) Increasing interest rates b) Reducing government spending c) Implementing monetary and fiscal stimulus d) Decreasing government debt Answer: c) Implementing monetary and fiscal stimulus 17. What was the role of Lehman Brothers in the 2008 financial crisis? a) It was a major lender to small businesses b) It was a key player in the mortgage-backed securities market and its bankruptcy triggered the crisis c) It was a government institution providing bailouts d) It was a major buyer of government bonds Answer: b) It was a key player in the mortgage-backed securities market and its bankruptcy triggered the crisis 18. Which economic theory emphasizes the need for government intervention during a financial crisis? a) Classical economics b) Monetarism c) Keynesian economics d) Supply-side economics Answer: c) Keynesian economics 19. What is “quantitative easing”? a) A method of reducing government spending b) A monetary policy used to stimulate the economy by increasing the money supply c) A technique for reducing interest rates d) A strategy for cutting taxes Answer: b) A monetary policy used to stimulate the economy by increasing the money supply 20. Which country implemented a large-scale bank rescue program known as the Troubled Asset Relief Program (TARP) during the 2008 financial crisis? a) United Kingdom b) Japan c) United States d) Germany Answer: c) United States 21. Which financial crisis is often associated with the bursting of the dot-com bubble? a) Asian Financial Crisis b) 2008 Financial Crisis c) 2000-2002 Tech Bubble Crash d) Latin American Debt Crisis Answer: c) 2000-2002 Tech Bubble Crash 22. Which factor contributed to the Latin American Debt Crisis of the 1980s? a) High levels of inflation b) Excessive borrowing from foreign banks c) Decline in commodity prices d) Political instability Answer: b) Excessive borrowing from foreign banks 23. What is a “debt crisis”? a) A situation where a country or organization cannot meet its debt obligations b) A period of low interest rates c) A time of economic growth and stability d) An increase in government savings Answer: a) A situation where a country or organization cannot meet its debt obligations 24. Which financial crisis led to the creation of the Eurozone and the single currency, the Euro? a) European Sovereign Debt Crisis b) 2008 Financial Crisis c) Latin American Debt Crisis d) Asian Financial Crisis Answer: a) European Sovereign Debt Crisis 25. What is “moral hazard” in the context of financial crises? a) The risk of investing in new markets b) The increased risk-taking behavior resulting from the expectation of bailouts c) The potential for ethical behavior in financial markets d) The chance of market volatility Answer: b) The increased risk-taking behavior resulting from the expectation of bailouts 26. What does the term “liquidity crisis” refer to? a) A lack of physical cash in the economy b) Difficulty in obtaining short-term funding c) A drop in real estate values d) A sudden increase in interest rates Answer: b) Difficulty in obtaining short-term funding 27. Which of the following was a major response to the 2008 financial crisis by central banks? a) Raising interest rates b) Tightening credit standards c) Lowering interest rates and implementing quantitative easing d) Cutting government spending Answer: c) Lowering interest rates and implementing quantitative easing 28. What is a “bank bailout”? a) The sale of distressed bank assets b) Government or central bank support to a failing bank c) A financial product designed to protect bank investments d) The closure of a bank branch Answer: b) Government or central bank support to a failing bank 29. Which country experienced a major financial crisis in 2001, leading to a default on its debt? a) Brazil b) Argentina c) Mexico d) Turkey Answer: b) Argentina 30. What is “systemic risk”? a) The risk associated with individual financial institutions b) The risk of a widespread financial collapse affecting the entire system c) The risk of small-scale financial disruptions d) The risk associated with personal finance management Answer: b) The risk of a widespread financial collapse affecting the entire system 31. Which regulatory body is responsible for overseeing and regulating the financial markets in the United States? a) Securities and Exchange Commission (SEC) b) Federal Reserve c) International Monetary Fund (IMF) d) World Bank Answer: a) Securities and Exchange Commission (SEC) 32. What is “toxic debt”? a) High-quality government bonds b) Debt that is unlikely to be repaid, often due to the issuer’s financial instability c) Loans with very low-interest rates d) Corporate bonds with investment-grade ratings Answer: b) Debt that is unlikely to be repaid, often due to the issuer’s financial instability 33. What economic event is often described as a “black swan” due to its rarity and severe impact? a) Regular market fluctuations b) A predictable recession c) A highly unexpected financial crisis d) A minor market correction Answer: c) A highly unexpected financial crisis 34. Which of the following was a major cause of the Global Financial Crisis of 2007-2008? a) High levels of government savings b) The collapse of major technology companies c) The bursting of the U.S. housing bubble d) The increase in global trade tensions Answer: c) The bursting of the U.S. housing bubble 35. What role did credit rating agencies play in the 2008 financial crisis? a) They provided accurate assessments of risk b) They failed to adequately assess the risk of mortgage-backed securities c) They reduced the ratings of all financial assets d) They prevented the crisis through regulation Answer: b) They failed to adequately assess the risk of mortgage-backed securities 36. Which financial institution’s failure was a pivotal moment in the 2008 financial crisis? a) Bank of America b) Lehman Brothers c) Goldman Sachs d) Morgan Stanley Answer: b) Lehman Brothers 37. What is a “financial bubble”? a) A period of steady economic growth b) An economic situation where asset prices are driven to unsustainable levels c) A situation of stable interest rates d) A time of low market volatility Answer: b) An economic situation where asset prices are driven to unsustainable levels 38. What term describes the situation when financial institutions become increasingly interconnected and the failure of one can lead to widespread problems? a) Financial contagion b) Systemic risk c) Moral hazard d) Liquidity crisis Answer: b) Systemic risk 39. What did the Basel III international regulatory framework aim to address? a) Currency exchange rates b) Financial stability and bank capital requirements c) Global trade agreements d) Tax policies Answer: b) Financial stability and bank capital requirements 40. What is “securitization” in finance? a) The process of converting assets into securities b) The act of repaying debt c) The buying and selling of currencies d) The management of financial risks Answer: a) The process of converting assets into securities

Global Financial Crises MCQs

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