1.One of the roles of the Fed is to be the lender of last resort.

A/True

B/False

2.Leveraging can encourage herding behavior.

A/True

B/False

3.Why are financial-sector crises scarier than collapses in other sectors of the economy?

A/Financial-sector crises happen more often than collapses in other sectors.

B/The financial sector is the biggest sector.

C/Most people work in the financial sector.

D/If the financial sector fails, it can bring the whole economy down with it.

4.A financial bailout might make better sense on economic grounds than a bailout of the automotive industry because:

A/the automobile industry brings problems on itself.

B/the automobile industry is smaller than the financial industry.

C/the finance industry is necessary for other industries to function.

D/automobile companies are less deserving than financial companies.

5.When a central bank is acting as a lender of last resort it is:

A/providing banks with Treasury bills for free.

B/buying long-term Treasury bonds and selling short-term Treasury notes.

C/providing banks with liquidity to meet their obligations.

D/buying Treasury bills directly from the public.

6.Liquidity is:

A/sufficient assets to cover long-run liabilities.

B/sufficient liabilities to cover long-run assets.

C/having assets that can be readily converted into cash.

D/having liabilities that can be readily converted into cash.

7.The 2008 financial crisis was caused largely by:

A/a bursting of the housing market bubble.

B/a run on banks and other financial institutions.

C/by the inability of the government to issue Treasury bonds.

D/a bursting of the automobile market bubble.

8.A company borrows money to supplement its current funds and uses it to buy more financial assets. This is what referred to as:

A/diversification

B/quantitative easing

C/leverage

D/herding

9.Suppose you work in investments for a financial institution, and other banks are making a fortune with Irish goldmines. The fact that you are more likely to move to invest in Irish goldmines just because you see other banks doing so is called:

A/the law of diminishing control.

B/herding.

C/diversification.

D/leverage.

10.The FDIC is an example of:

A/deposit insurance.

B/risk premium.

C/the Glass-Steagall Act

D/a Federal Reserve Bank tool.

11.IMF

WASHINGTONThe world economy is increasingly at risk of stalling, the International Monetary Fund warned Tuesday as it once again cut its forecast for global growth prospects.

The IMF said it was forced to downgrade its growth forecast for this year to 3.2%, down by 0.2 percentage point from its projection issued in January. China's slowdown and weak commodity prices are taking a deeper toll on emerging markets than expected and rich countries are still struggling to escape the legacies of thefinancial crisis, the fund said.

The downward revision is the fourth straight cut in a year, putting world economicgrowthjust a hair over last year's 3.1% and only marginally above the 3% rate the IMF has previously considered a technical recession globally.

"Consecutive downgrades of future economic prospects carry the risk of a world economy that reaches stalling speed and falls into widespread secular stagnation," IMF Chief Economist Maurice Obstfeld said as the fundlaunched its flagship report(Links to an external site.)

. The IMF is worried such stagnation could further stifle investment, smother wage growth, curb employment and push government debt to unsustainable levels in some countries.

"Does that culminate in some crisis and recession? It's not clear at all that would be the case," Mr. Obstfeld said. "But we definitely face the risk of going into doldrums that could be politically perilous," he said.

The increasingly dour outlook sets the tone for the semiannual IMF and World Bank meetings this week in Washington, where financial leaders from around the globe will gather to take stock of the global economy.

Recessions in Russia and Brazil are proving to be deeper and longer than the IMF anticipated after political problems compounded the effects of a plunge in commodity prices. Dozens of other oil exportersfrom Venezuela to Canada, Saudi Arabia to Nigeriaare also facing sharp slowdowns.

The IMF upgraded China's growth forecast this year by 0.2 percentage point to 6.5% as the service sector compensated for a downturn in manufacturing. But the country's deceleration continues to hit trade partners around the world. Jitters about the fate of the world's second-largest economy have roiled global markets in the past year.

China's slowdown, along with the commodity-price downswing and the U.S. Federal Reserve's move to start raising interest rates, packed a triple-punch to most emerging and developing economies around the world. Investors pulled out their cash in droves, pushing down exchange rates and equity prices, and raising bond premiums. China's troubles also slashed trade and investment in many of those countries and spurred broader concerns about growth prospects in advanced economies.

The IMF said Beijing's plans to boost output and overhaul its economy aren't sufficient to address long-term growth concerns.

"Our concern is that some of the stimulus is likely to take the form of higher credit growth, more support for sectors that are...declining and not that productive." Mr. Obstfeld said. "And so we worry about thequality of growthmore than the quantity of growth."

Those comments give support to investors who are skeptical that authorities will be able to manage a smooth transition away from the country's credit-fueled growth model toward one based more on markets and consumption.

Europe and Japan, meanwhile, can't seem to escape from low growth despite aggressive central-bank actions that havepushed rates into uncharted negative territory(Links to an external site.)

.

"Persistent slow growth has scarring effects that themselves reducepotential outputand with it, consumption and investment," the IMF said.

A strong dollar, dimmer global growth prospects and soft oil prices also sapped output in the world's largest economy, the U.S. The IMF shaved 0.2 percentage point off its U.S. growth forecast for the year to 2.4%.

Although global markets have recently clawed back some of the losses recorded early this year, the IMF said investors shouldn't be complacent about the myriad risks threatening to derail an increasingly frail global economy.

Greece's long-festering debt problems, a mounting refugee crisis and the U.K.'s potential exit from the European Union risk wreaking havoc on the eurozone and beyond, the IMF said. A misstep by Beijing could spark global market turmoil. Renewed stress in emerging markets, especially given rising corporate debt problems, could create financial stress, sovereign debt concerns, further exchange-rate depreciations and greater capital flight.

Amid those threats, the IMF also cut its global forecast for next year by 0.1 percentage point to 3.5%. But even that limited acceleration is based on a host of assumptions, including a smooth Chinese economic rebalancing, a pickup in commodity exporters and emerging markets more broadly.

"The current diminished outlook and associated downside possibilities warrant an immediate response," Mr. Obstfeld said. "There is no longer much room for error."

For the IMF, that means more easy money from central banks, new government-funded infrastructure investment and economic overhauls to raise productivity, competitiveness and investor confidence.

Although central banks are pressing the easy-money accelerator, other financial leaders have so farfailed to deliver on promises to boost economic growth(Links to an external site.)

through coordinated measures.

Still, the IMF said policy makers should draft contingency plans for a joint response to revive growth should the global economy stagnate further. In one downside scenario that assumed a steady decline in global growth, the IMF suggested budget outlays of 1.5% of GDP in rich countries and 1% of GDP in emerging markets should help jolt the world economy out of its malaise.

This is for the IMF article. Emerging markets produces commodities and per the article commodity prices are _________________. From this statement the emerging markets are becoming ______________. Due to this emerging markets will grow at a ______________________.

A/High; poorer; faster pace

B/Low; poorer; slower pace

C/Low; richer; slower pace

D/High; poorer; faster pace

12.Saudi

Saudi Arabia's decision toreject an international plan(Links to an external site.)

to limit oil output could push other big producers to the brink almost two years into a historic crude-price slump.

Saudi Arabia, the world's largest exporter of crude, scuttled the hopes of countries like Russia, Venezuela and Angola, which wanted a deal that would freeze production at January levels and begin regulating the global glut of oil that has sunk prices. Nearly half of the countries sitting at the table in recent days in DohaIraq, Nigeria,Angola(Links to an external site.)

, Ecuador,Venezuela(Links to an external site.)

and Azerbaijan, among othersare seeking financial support from international backers.

In Venezuela, where President Nicols Maduro trumpeted the oil-producer talks as a first step toward fiscal recovery, the economy is set to contract again this year as petroleum revenues dwindle. Thecash crunch has hurt(Links to an external site.)

power generation, prompting the government to declare a national holiday on Monday to conserve energy usage and to consider a time-zone change.

Without naming any country, Venezuela's oil minister Eulogio del Pino said last-minute decisions had "sabotaged" the summit. But speaking to reporters on the side of a conference in Moscow on Monday, he said the drop in oil "prices could be so pronounced that this reality may force us to meet again," according to the website of the country's state-run oil company Petrleos de Venezuela SA.

In Russia, where the government was among the architects of the Doha talks, oil minister Alexander Novak said the failure to reach a deal would delay a recovery in oil prices to mid-2017. Senior Russian government officials had been counting on higher oil prices to lift the country out of a recession.

Now, instead of a freeze in production this year, "we expect growth in production compared with 2015," Mr. Novak said.

Russia's economy contracted 3.7% in 2015 amid weaker oil prices and Western sanctions. The country's central bank forecasts gross domestic product to shrink a further 1.5% this year.

Angola, a member of the 13-nation Organization of the Petroleum Exporting Countries, is seeking financial aid from the International Monetary Fund as it prepares for a critical political transition.

"The government of Angola is aware that the high reliance on the oil sector represents a vulnerability to the public finances and the economy more broadly," Angola's finance ministry said this month.

Azerbaijan, which relies on oil and gas exports for 75% of its revenues and supported the Doha talks, has also held talks with the IMF on a possible bailout.Nigeria, an OPEC member(Links to an external site.)

with inflation at nearly 13%, is holding talks with the World Bank to help it close a forecast $11-billion budget deficit this year.

In Kazakhstan, where thegovernment relies on oil(Links to an external site.)

for around half of its revenue, the IMF forecast GDP growth of 0.1% this year, compared with 1.2% in 2015 and 6% in 2013 before oil prices started falling.

Meanwhile, vulnerable oil producers are beginning to pump less petroleum because they don't have enough money to make investments in the energy sector.

Venezuelan crude production is down by 46,000 barrels a day in March compared with its 2014 average. In Nigeria, a new wave of sabotage has taken 189,000 barrels a day offlinein the same period.

Kazakhstan's oil output is expected to decline this year for the third year in a row because of spending cuts and delays in launching output at the giant Kashagan oil field. Azerbaijan's production is also is expected to fall this year mostly because of declines at the BP PLC-operated ACG oil field.

In contrast, Saudi Arabia is in a better position to ride out low prices. The kingdom still held foreign reserves worth $582 billion as of late February, according to the IMF, and plans to set up a sovereign fund worth $2 trillion. The Kingdom also has the ability to boost production by 2 million barrels a day at will, according to the International Energy Agency, the bulk of the world's available spare production capacity.

The Saudis had signaled they were ready to make a deal in Doha over the weekend. The plans changed at the last minute, a day after Deputy Crown Prince Mohammed bin Salman told Bloomberg thatthe kingdom wouldn't make a deal unless Iran also constrained its production. Iran and Saudi Arabia are longtime rivals for power and influence in the Middle East.

Olivier Jakob, an analyst at Switzerland-based energy consultancy Petromatrix, said Saudi oil minister Ali al-Naimi would have lost credibility with Russia and others in what would have been a symbolic first step which could have led to greater OPEC and non-OPEC cooperation in the future.

A Persian Gulf oil official familiar with Saudi thinking said the kingdom's oil officials are "well aware that they have lost their credibility."

"But the kingdom is not totally shutting the door on further cooperation in the future," the official said, noting that there could be renewed talks on oil production "when the picture in the market is clearer."

This is for the Saudi article. Per the article, countries dependent on their oil for wealth will _______________ when oil prices decreases.

A/Expand

B/Contract

13.This is for the Saudi article. Per the article, Russia needs the price of oil to ___________________ to get their economy out of a contraction.

A/Decrease

B/Increase

C/Stay the same

14.This is for the Saudi article. Per the article, countries like Russia, Venezuela, and Kazakhstan, who are dependent on oil revenue, faces a ____________________ sloping Aggregate Demand curve when oil price decreases. This is because they put their wealth on oil.

A/Upward

B/Downward

15.This is for the Russia article.

Russia

MOSCOWRussia's central bank cut its key interest rate on Friday, but its unusually transparent governor promised there would be no more cuts this year as longer-term inflation risks remain.

The Bank of Russia cut the rate to 10% from 10.5%, resisting calls from investors and lawmakers to move more aggressively. Central Bank Gov. Elvira Nabiullina said the cut was aimed at propping up lending activity in the economy, which is on track to shrink 0.5% this year after falling 3.7% in 2015.

Friday's move was priced in, but most analysts had predicted further moderate rate cuts this year, as inflationnow at 6.6% annuallyhas slowed significantly.

Cutting rates forthe second time this year(Links to an external site.)

, Ms. Nabiullina said inflation was slowing in line with expectations, and the bank would maintain a moderately tight policy to hit its target of 4% inflation by the end of 2017.

"With this objective in mind it is necessary to keep the key rate at 10% at least until the end of the year," Ms. Nabiullina said. "We will review the possibility of lowering (the rate) no earlier than in the first and second quarter of 2017."

Ms. Nabiullina said that real interest rates, or the difference between inflation and the main central bank rate, should remain between 2.5% and 3% in the long run. For now, while inflationary risks and expectations are still strong, Russia's real rate should be even higher, she added.

"This is a measured response from a cautious central bank," said Victor Szabo,Aberdeen Asset Management(Links to an external site.)

senior fixed income investment manager. "This effectively fired a shot across the bows of anyone hoping for a series of aggressive cuts."

The cut brought the main rate closer to precrisis levels of early 2014, beforeRussia annexed Crimea(Links to an external site.)

and was targeted with broad Western sanctions. Later that year, Russia's economy took a battering as the price of oil, its major export, plummeted and the central bank was forced to raise the rate to 17% to save the tanking ruble.

The ruble showed only muted reaction to Friday's rate cut, hovering close to 65 against the dollar, and Ms. Nabiullina said there were no reasons for the ruble to weaken this year.

Ms. Nabiullina said that while inflation readings are lower now, expectations for higher inflation played a role in the central bank's decision to put rate cutting on hold, as did uncertainty about fiscal spending.

This year, the government failed to adjustpensions(Links to an external site.)

in line with the previous year's inflation rate as usual, raising them by 4% instead the 2015 inflation rate of nearly 13%. The government promised a one-time payment of 5,000 rubles ($77) in January and has pledged to continue indexing pensions beginning next year.

"Going forward, we consider the budget policy will be the main watch factor in forecasting policy rate pattern," said Natalia Orlova, chief economist at Alfa Bank. "The seasonality of the budget payments thus suggests that in the base case, the rate cut could be expected only in March 2017."

Per the article, the Russian currency (called the ruble) was losing value. To help prevent the currency from losing more value the central bank _______________ to make it more attractive.

A/Increased the interest rate

B/Increased the required reserve

C/Decreased the interest rate

D/Decreased the required reserve