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Causes and Consequences of the 2008 Financial Crisis Quiz

#1

Which financial institution collapsed in September 2008, triggering the global financial crisis?

Lehman Brothers
Explanation

Lehman Brothers' collapse sparked the 2008 crisis.

#2

What was the primary cause of the 2008 financial crisis?

Unsustainable housing bubble
Explanation

The crisis stemmed from an unsustainable housing bubble.

#3

Which financial instrument played a significant role in spreading the risk that led to the 2008 financial crisis?

Credit default swaps
Explanation

Credit default swaps contributed to risk dispersion.

#4

What term describes the practice of banks issuing loans to borrowers with poor credit history, contributing to the housing bubble?

Subprime lending
Explanation

Subprime lending fueled the housing bubble.

#5

Which U.S. government-sponsored enterprise was heavily involved in the subprime mortgage market prior to the 2008 financial crisis?

Fannie Mae
Explanation

Fannie Mae played a significant role in the subprime market.

#6

What term is used to describe the practice of bundling together various types of debt and selling them as securities to investors?

Collateralized debt obligation
Explanation

Collateralized debt obligations were commonly sold to investors.

#7

Which rating agencies were criticized for assigning overly optimistic ratings to mortgage-backed securities prior to the 2008 financial crisis?

All of the above
Explanation

Multiple rating agencies were criticized for optimistic ratings.

#8

Which of the following was NOT a consequence of the 2008 financial crisis?

Rapid economic growth
Explanation

The crisis did not lead to rapid economic growth.

#9

Which country experienced a sovereign debt crisis as a result of the 2008 financial crisis?

Greece
Explanation

Greece faced a sovereign debt crisis post-2008.

#10

What term refers to the situation where a decline in asset values leads to a further decrease in their value, triggering a self-reinforcing cycle?

Feedback loop
Explanation

A feedback loop exacerbates asset value declines.

#11

Which major financial institution was acquired by Bank of America during the 2008 financial crisis?

Countrywide Financial
Explanation

Bank of America acquired Countrywide Financial amid the crisis.

#12

What was the name of the investment bank that was bailed out by the U.S. government in 2008 and later acquired by JPMorgan Chase?

Merrill Lynch
Explanation

Merrill Lynch was bailed out and later acquired by JPMorgan Chase.

#13

What term is used to describe the situation where financial institutions hold insufficient capital to cover potential losses?

Solvency risk
Explanation

Solvency risk arises when institutions lack capital for potential losses.

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