Question 21

Which of the five policy areas does Kling believe is second most important in explaining the crisis?

	A.	Housing policy
	B.	Capital regulations
	C.	Monetary policy
	D.	Competitive boundaries in financial intermediation

Question 22

According to Kling would it have helped prevent crisis if interstate restrictions were kept?

	A.	It would have done little or nothing.
	B.	It would have prevented the crisis.
	C.	It had the potential to prevent crisis.
	D.	While it would have done much to prevent crisis, it may not have done enough on its own.

Question 23

One common explanation of the crisis is the bursting of the housing bubble. Why does Kling argue that this bubble was not exclusively created by American housing policies?

	A.	Savings in China that flowed into American property markets were the only thing that caused the bubble.
	B.	Flows from savings in China and other rapidly growing counties were reducing the bubbles.
	C.	There were no actually property bubbles prior to the crisis.
	D.	The bubbles also existed in England and Spain.

Question 24

According to Kling what did the mortgage interest deduction not do?

	A.	Gave homeowners a reason to believe that home equity loans were the cheapest form of credit available.
	B.	Increase the amount of debt consumers were willing to have on their homes.
	C.	Increase home ownership.
	D.	Increase the demand for larger and higher quality homes.

Question 25

Which of the five policy areas does Kling believe is second most important in explaining the crisis?

	A.	Housing policy
	B.	Capital regulations
	C.	Response to financial innovation
	D.	Competitive boundaries in financial intermediation

Question 26

According to Kling, what are the most useful steps regulators could take to prevent crisis in the future?

	A.	Policy makers should use the mortgage interest deduction and Freddie Mac and Fannie Mae to revert to a traditional lending undertaking by banks, which might prove to be more sound.
	B.	Policy makers could prevent a recurrence of the financial markets crisis by tilting policies away from debt finance.
	C.	Creating a financial system more dependent on centralized regulation.
	D.	It is likely that our financial system will benefit from new rules and institutions.

Question 27

What did the Federal Reserve believe was most to blame for the financial crisis?

	A.	Loss of confidence in financial institutions.
	B.	Bad decisions by financial institutions.
	C.	Bad bets made in financial markets.
	D.	Extensive measures taken by policy makers.

Question 28

Many, including the Obama administration, argue that the financial industry's structure is to blame for the domino effect and bank runs. Why and how does Kling dissent from this opinion?

	A.	The domino effects and bank runs caused the financial industry's structure, not the other way around.
	B.	The capital regulations caused the structures that were eventually the causes of the domino effect and bank runs. It is casually prior.
	C.	Domino effects and banks runs were effectively stopped by government intervention which implies that the financial industry's structure could not have been the main cause.
	D.	Kling claims the Administration's arguments concerning the financial industry's structure's role in the crisis was a straw man and that these financial structures never truly existed, or at least could not have caused the excessive leverage that lead to the domino effects and bank runs.

Question 29

What did the erosion of competitive boundaries in banking do to the nature of banks?

	A.	Banks became larger and more complex and non-bank financial firms became important and more interconnected with banks.
	B.	Banks became smaller and less complex and non-bank financial firms became important and less interconnected with banks.
	C.	Banks became smaller and less complex and non-bank financial firms became important and more interconnected with banks.
	D.	Banks became larger and more complex and non-bank financial firms became important and less interconnected with banks.

Question 30

Which of the following is not one of the four elements of the financial crisis?

	A.	Domino effects
	B.	Bad bets
	C.	Excessive leverage
	D.	Housing policy