HIST 103: Contemporary World History
Quiz on the Global Financial Crisis
INSTRUCTIONS. Use a pencil to completely shade the circle corresponding to your selected
answer on the answer sheet. Ensure that only one answer is shaded for each question. Erase
any stray marks completely. Unshaded or multiple-shaded answers will be marked incorrect.
1. What is securitization in the context of banking?
A. The process of obtaining government guarantees for deposits
B. The slicing, dicing, and packaging of mortgage repayments into securities
C. The freezing of credit markets to control risks
D. The issuance of traditional mortgages by banks
2. Why did the credit markets freeze in August 2007?
A. A global decision to tighten monetary policy
B. A lack of trust in the quality of mortgage-backed securities
C. An abrupt rise in global house prices
D. A sudden drop in international trade
3. What was the primary funding model for Northern Rock?
A. Mortgage-backed securities and deposits
B. Traditional deposits and government bailouts
C. Securitization and wholesale money markets
D. High-interest loans and private savings
4. What is the significance of 15 September 2008 in the global financial crisis?
A. The day Northern Rock was nationalized
B. The start of the Troubled Assets Relief Program
C. The day Lehman Brothers filed for bankruptcy
D. The announcement of the ECB's intervention
5. Which explanation for not bailing out Lehman Brothers is deemed oversimplified in
the content?
A. Lack of funds
B. Moral hazard concerns
C. Bipartisan backlash risk
D. Fear of international criticism
6. What role did the US Federal Reserve play during the European banking crisis?
A. Imposing stricter regulations on banks
B. Providing dollar liquidity through swap lines
C. Guaranteeing European sovereign debts
D. Nationalizing European banks
7. What factor contributed to the bursting of property bubbles in Ireland and Spain?
A. Low levels of international funding
B. High loan-to-value mortgage ratios
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C. Strict monetary policies
D. Low-interest rates in domestic markets
8. How did housing policies in the US differ from other countries?
A. Encouraging home ownership through financial deregulation
B. Prohibiting loans to low-income families
C. Imposing strict caps on mortgage debt
D. Relying on public housing over private loans
9. What does Table 1 primarily illustrate?
A. The timeline of events leading to the eurozone's economic recovery
B. Key chronological events of the global financial crisis
C. The impact of the crisis on global GDP
D. Financial reforms introduced during the crisis
10. Which economic consequence of the crisis is highlighted for the UK?
A. The rapid recovery of GDP
B. The slowdown in productivity growth
C. The increase in home ownership rates
D. The rise in international investments
11. How did the crisis affect the relationship between mortgage debt and GDP in
countries like Ireland?
A. Debt became substantially lower than GDP.
B. Mortgage debt significantly exceeded GDP.
C. Debt levels aligned closely with GDP.
D. No significant relationship was observed.
12. What change was made to the Troubled Assets Relief Program (TARP)?
A. It provided guarantees and direct capital to banks instead of buying toxic assets.
B. It was terminated due to bipartisan backlash.
C. It replaced mortgage-backed securities with government bonds.
D. It shifted focus from banks to individual homeowners.
13. What does the index of real US house prices between 2001 and 2007 reveal?
A. A steady decline in housing affordability
B. An exponential increase in property values
C. A plateau in housing market activity
D. Stabilized housing prices
14. How did political factors contribute to the financial crisis?
A. They discouraged low-income homeownership.
B. They deregulated financial sectors to enable risky lending.
C. They imposed excessive restrictions on credit markets.
D. They prioritized public housing over market solutions.
15. What role did foreign capital play in the housing boom?
A. It led to tighter lending standards.
B. It fueled the availability of mortgage funds.
C. It reduced housing starts and sales.
D. It encouraged banks to issue fewer loans.
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16. What lesson can be learned from Northern Rock's experience?
A. Diversified funding models reduce risk.
B. High dependency on wholesale markets increases vulnerability.
C. Subprime mortgages ensure long-term stability.
D. Securitization prevents bank runs.
17. Which country did not rely on foreign subprime MBS but still faced a banking crisis?
A. Ireland
B. Germany
C. Spain
D. UK
18. What is a potential downside of encouraging low-income homeownership through
deregulation?
A. Increased demand for high-value housing
B. Lower default risks in subprime markets
C. Financial instability due to risky loans
D. Reduction in housing market activity
19. What does Figure 2 on annual GDP growth suggest about the global financial crisis?
A. The crisis had no long-term impact on GDP.
B. GDP contractions were unprecedented across major economies.
C. GDP growth stabilized quickly after the crisis.
D. Growth patterns were unaffected in emerging economies.
20. What measure did the UK government implement to stabilize its banking system?
A. Creation of a long-term austerity program
B. Provision of asset guarantees and capital injections
C. Complete privatization of all banks
D. Suspension of international trade agreements
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Answer Key with Rationalizations and Domains
1. B - Securitization involves the slicing and packaging of mortgage repayments into securities.
(Understanding)
2. B - Freezing occurred due to doubts about mortgage-backed securities' quality.
(Remembering)
3. C - Northern Rock relied on securitization and wholesale funding. (Analyzing)
4. C - Lehman Brothers' bankruptcy marked a critical moment in the crisis. (Remembering)
5. C - Bipartisan backlash is identified as a deeper reason. (Analyzing)
6. B - The Federal Reserve provided dollar liquidity to European banks. (Understanding)
7. B - High loan-to-value ratios exacerbated property bubble issues. (Applying)
8. A - US policies encouraged low-income homeownership through deregulation. (Evaluating)
9. B - Table 1 outlines the timeline of the crisis. (Understanding)
10. B - The crisis led to slower productivity growth in the UK. (Analyzing)
11. B - Mortgage debt exceeded GDP in some countries. (Understanding)
12. A - TARP shifted focus to guarantees and capital. (Analyzing)
13. B - US house prices increased significantly before the crisis. (Remembering)
14. B - Deregulation of the financial sector enabled risky lending. (Applying)
15. B - Foreign capital increased mortgage funds. (Understanding)
16. B - Northern Rock's funding model heightened risk. (Evaluating)
17. A - Ireland faced its own property bubble issues. (Analyzing)
18. C - Deregulation led to financial instability. (Applying)
19. B - The crisis caused significant GDP contractions. (Evaluating)
20. B - The UK used asset guarantees and capital injections to stabilize. (Understanding)
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