1- Lehman Brothers collapsed when

a-it started accepting deposits.

b-it ran out of long-term investment prospects.

c-it became subject to new restrictive governmental regulations.

d-it was no longer able to convince creditors that it was a safe place for parking short-term funds.

2- What term is applied to situations in which the failure of one financial institution increases the odds that another will fail?

a-Fire sale

b-Asset bubble

c-Financial contagion

d-Shadow banking

3- Inspite of enacting a fiscal and monetary stimulus, the United States is experiencing a slow recovering from the recession. As the Reinhart-Rogoff study shows, this is because:

a-economies experiencing a severe banking crisis tend to recover from any adverse effects within a year.

b-economies experiencing a severe banking crisis tend to endure a slow and prolonged recovery.

c-the unemployment rate remains stable following a banking crisis.

d-the unemployment rate decreases following a banking crisis.

4- Consumers and businesses with debt overhang are likely to:

a-increase their borrowing and decrease their spending.

b-increase their borrowing and increase their spending.

c-decrease their borrowing and decrease their spending.

d-decrease their borrowing and increase their spending.

5- Financial problems began in Greece when:

a-the Greek government revealed that it had understated the size of its budget deficits and debt.

b-the European Union forced Greece to give up its membership.

c-Greece adopted the euro.

d-the United Nations imposed trade sanctions on Greece.