A)The bonuses received by employees in the financial industry have been identified as a source of the Financial Crisis that began in 2007. Which of the following reasons best supports implicating the bonuses in this way?

1)The bonuses were too great a percentage of employee compensation.

2)Any system of bonuses will prompt employees to take inappropriate risks.

3)Bonuses were paid on short-term, not long-term, earnings.

4)The bonus culture of the banks became too ingrained.

B)The efficient markets hypothesis postulates that prices of financial assets reflect all publicly available information. Given the rapid fall in the price of collateralized debt obligations (CDOs) based on sub-prime mortgages that occurred during the financial crisis that started in 2007, which of the following pieces of information did the prices of those CDOs reflect after the fall in price?

1)An updated assessment of the likelihood of a nationwide housing price decline in the United States

2)High ratings of the CDOs by bond ratings agencies

C)True or False: The European Central Bank responded to the Financial Crisis by raising interest rates in order to keep inflation in check.

D)Which of the following statements are true regarding the Greek debt crisis? Check all that apply.

1)At one point, the spread between Greek and German ten-year bonds was higher than 11 per cent.

2)The financial markets were worried that the problems in Greece would spread to other low debt countries.

3)The financial markets expected the value of the euro to rise if Greece defaulted and was forced to leave the euro.

4)Austerity measures by the Greek government were not viewed positively by Greek workers.