Chapter 12(23) Money Creation and the Federal Reserve—Around the World

Read the following articles and pages in order to answer the below questions.

"Credit Default Swaps: The Next Crisis?", Time
"Why the Warnings were Ignored: Too many False Alarms", The Becker-Posner Blog

Question

1. According to Time, what is the purpose of the Credit Default Swap (CDS)?

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B.
C.
D.

Question

2. At the time of the Time article publication, what did the author view as a potential ramification of the meltdown of the CDS market?

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B.
C.
D.

Question

3. According to Gary Becker in the blog post “Why the Warnings Were Ignored: Too Many False Alarms,” what is the reason economists and others could NOT see the financial crisis coming?

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B.
C.
D.

Question

4. While helping banks to manage risk, what did financial instruments encourage banks to do?

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B.
C.
D.

Question

5. Based on what you read, which statement accurately describes the societal costs and benefits of financial instruments?

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B.
C.
D.