Question

For each statement below, answer whether the statement is true, false, or uncertain for the U.S economy. Briefly explain your answer.

(1) A fall in the prime mortgage rate occurred just before the GDP fell in every recession after 1970.

(2) Not all types of investments move in the same direction as real GDP.

(3) Over a long term, say, from 1982 to 2006, growth in the residential property price outpaced growth in real GDP.

(4) Percentage changes in the unemployment rate and real GDP are similar.

(5) In the Great Recession, the U.S. Treasury and the FED bought only asset backed and mortgaged backed securities.

(6) RR (Reinhart and Rogoff, 2009) classify a period of time as a banking crisis only if there is a bank run.

(7) TARP is a program that allowed the U.S. Treasury to sell its bonds to the Federal Reserve system at artificially high prices.

(8) In Phase 3 of quantitative easing, the FED was committed to open-ended purchases of more than $30 billion per month of agency MBS.

(9) Buying in the Federal Funds market means that a depository institution uses reserves to buy Treasury securities.

(10) Fed Funds are reserves that the Federal Reserve makes available at the discount window.

(11) The ratio of a country’s external debt to GNP is not the only indicator that RR use to compute the country’s debt intolerance.

(12) To borrow and lend in the Fed funds market, a bank puts up collateral.

Answer 1