Question : 9.2 Dynamics of Past U.S. Financial Crises 1) When financial institutions : 1373706

9.2 Dynamics of Past U.S. Financial Crises

1) When financial institutions go on a lending spree and expand their lending at a rapid pace they are participating in a

A) credit boom.

B) credit bust.

C) deleveraging.

D) market race.

2) When the value of loans begins to drop, the net worth of financial institutions falls causing them to cut back on lending in a process called

A) deleveraging.

B) releveraging.

C) capitulation.

D) deflation.

3) When financial intermediaries deleverage, firms cannot fund investment opportunities resulting in

A) a contraction of economic activity.

B) an economic boom.

C) an increased opportunity for growth.

D) a call for government regulation.

4) A credit boom can lead to a(n) ________ such as we saw in the tech stock market in the late 1990s.

A) asset-price bubble

B) liability war

C) decline in lending

D) decrease in moral hazard

5) Many 19th century U.S. financial crises were started by

A) spikes in interest rates.

B) financial innovation.

C) onerous financial regulations.

D) a strong improvement in banks’ balance sheets.

6) Most U.S. financial crises have started during periods of ________ either after the start of a recession or a stock market crash.

A) high uncertainty

B) low interest rates

C) low asset prices

D) high financial regulation

7) If uncertainty about banks’ health causes depositors to begin to withdraw their funds from banks, the country experiences a(n)

A) banking crisis.

B) financial recovery.

C) reduction of the adverse selection and moral hazard problems.

D) increase in information available to investors.

8) Debt deflation occurs when

A) an economic downturn causes the price level to fall and a deterioration in firms’ net worth because of the increased burden of indebtedness.

B) rising interest rates worsen adverse selection and moral hazard problems.

C) lenders reduce their lending due to declining stock prices (equity deflation) that lowers the value of collateral.

D) corporations pay back their loans before the scheduled maturity date.

9) A substantial decrease in the aggregate price level that reduces firms’ net worth may stall a recovery from a recession. This process is called

A) debt deflation.

B) moral hazard.

C) insolvency.

D) illiquidity.

10) A possible sequence for the three stages of a financial crisis in the U.S. might be ________ leads to ________ leads to ________.

A) asset price declines; banking crises; unanticipated decline in price level

B) unanticipated decline in price level; banking crises; increase in interest rates

C) banking crises; increase in interest rates; unanticipated decline in price level

D) banking crises; increase in uncertainty; increase in interest rates

11) The economy recovers quickly from most recessions, but the increase in adverse selection and moral hazard problems in the credit markets caused by ________ led to the severe economic contraction known as The Great Depression.

A) debt deflation

B) illiquidity

C) an improvement in banks’ balance sheets

D) increases in bond prices

12) Typically, the economy recovers fairly quickly from a recession. Why did this not happen in the United States during the Great Depression?

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36.Labor and overhead are often grouped together and referred to as

A.prime costs.

B.conversion costs.

C.total manufacturing costs.

D.equivalent unit costs.

37.Which of the following statements about process costing is true?

A.Total transferred-in cost is equal to the total transferred-out cost during a period.

B.The costs of inventory completed in its final department in the manufacturing process will be transferred to Finished Goods inventory.

C.If a department has transferred-in costs, it means that the inventory accounts were not closed correctly at the end of the last period.

D.None of the answer choices are correct.

38.A cost incurred by the Baking Department that is transferred to the Packaging Department is called a

A.conversion cost by the Baking Department.

B.transferred-out cost by the Packaging Department.

C.equivalent unit cost by the Baking Department.

D.transferred-in cost by the Packaging Department.

39.When direct labor costs are incurred in the Mixing Department, the journal entry to record the transaction includes a

A.debit to Wages Payable.

B.credit to Manufacturing Overhead.

C.credit to Work in Process, Mixing Department.

D.debit to Work in Process, Mixing Department.

40.In a process costing system, manufacturing overhead is added to Work in Process

A.using a predetermined overhead rate or based on actual overhead.

B.only in the final production department.

C.at the same rate as the direct materials are added.

D.only when Work in Process is transferred to Finished Goods.

41.Transferred-in costs are recorded with a journal entry that includes a credit to

A.Raw Materials.

B.Manufacturing Overhead.

C.Work in Process.

D.Finished Goods.

42.Which of the following will never be a component of the cost of Work in Process in a company’s initial production department?

A.Direct material

B.Direct labor

C.Transferred-in costs

D.Manufacturing overhead

43.How are equivalent units calculated in a process costing system?

A.By adding the units started to the equivalent units in beginning and ending inventory

B.By adding the units completed to the equivalent units in ending Work in Process

C.By subtracting the equivalent units in beginning inventory from the total units to account for

D.By adding the units started to the equivalent units in ending inventory

44.In the calculation of the cost per equivalent unit, the denominator

A.is the total work done during the period plus the equivalent units in ending inventory.

B.includes both the number of units completed and the number of equivalent units in ending Work in Process.

C.equals the work done during the period less the work remaining to finish ending inventory.

D.is the work done for the current and preceding departments.

45.The Baking Department began the period with 16,000 units which were 45% complete. During the period, the department received another 78,000 units from the previous department, and at the end of the period, 9,000 units remained which were 40% complete. Conversion costs are added evenly throughout the process and materials are added at the beginning of the process. How much are equivalent units for conversion costs in the Baking Department’s Work in Process inventory at the end of the period?

A.5,400 units

B.3,600 units

C.3,000 units

D.9,000 units