Sustainable enterprise a macromarketing approach 1st edition mark peterson test bank

Former Federal Reserve Chairman Alan Greenspan testified before the House Committee on Oversight and Government Reform on October 23rd, 2008 and said A he believed Presidential candidate

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Chapter 2: How Efficient and How Effective Are Markets?

Multiple Choice

1 Former Federal Reserve Chairman Alan Greenspan testified before the House Committee on Oversight and Government Reform on October 23rd, 2008 and said

A) he believed Presidential candidate Barack Obama understood how to resolve problems stemming from the economic crisis of 2008

B) the market ideology that he used for forty years or more was flawed

C) Bank of America had paid too much for Merrill Lynch

D) if it were up to him, he would move the US to the gold standard and dispense with currency markets being allowed to determine the exchange value of the US dollar

E) GM and Chrysler should be bailed out by the federal government

Ans: B

2 In the by-gone days of investment banking, before deregulation of the finance industry in the 1980’s, executives in investment banks use to call themselves “asset rich—but poor” This was due to

A) the inflexibility of converting shares of stock into bonds

B) the high tax rates applied by the federal government to the earnings of investment banking executives

C) the difficulty of carrying partnership privileges into their retirement

D) the high interest rates in the early 1980s

E) the vesting period for executive bonuses The partnership of the investment bank would hold the bonus for five years before turning it over to the executive

Ans: E

3 The US government intervened in markets in the Autumn of 2008 by

A) taking a 79.9 % ownership of the world’s largest insurance underwriter AIG

B) allowing large financial institutions to become bank holding companies that allowed them to seek government aid

C) suspending broadcasts of “Mad Money” starring the frenetic Jim Cramer until Cramer’s part

in the Economic Crisis of 2008 could be determined

D) all of the above

E) a and b above only

Ans: E

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4 An example of the federal government providing protection to private business can be seen when

A) all major banks in the US received cash infusions from the Federal government in October

2008

B) the federal government allowed investment bank Lehmann Brothers to fail

C) the federal government stepped in to bail out the Ford Motor Company

D) senior executives of financial institutions received soft treatment in news analysis of the

Economic Crisis of 2008 on the Public Broadcasting Service’s The News Hour with Jim Lehrer

E) the federal government refusing to use the Federal Housing Finance Agency to take over Fannie Mae and Freddie Mac – two government-sponsored entities

Ans: A

5 From April 28th, 2008 to March 2nd, 2009, the Dow-Jones Industrial Average of stock prices for 30 large US companies

A) recovered to break even

B) actually rebounded to post a 3 % increase

C) dropped 29%

D) dropped more than 49 %

D) had to be discontinued for six weeks because of uncertainty in the financial markets

Ans: D

6 Due to the increased connections between national markets today,

A) the United Nations intervened in global currency markets in the Autumn of 2008

B) the effects of the meltdown in US financial markets began hitting other countries and their financial and goods markets

C) China and Russia sharply criticized the failings of capitalistic systems, such as those of the West

D) the World Trade Organization can influence interest rates in a manner similar to those of a central bank

E) car dealers in Saudi Arabia immediately decided to let prices of autos go down as they were doing in other countries of the world

Ans: B

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7 Surprisingly to free market ideologues, _ and — the two pillars of laissez-faire economics—failed to keep the markets away from the precipice of disaster

A) Alan Greenspan and Milton Friedman

B) collaterized debt obligations (CDOs) and standardized financial products

C) self-interest and competition

D) futures and options

E) Real Estate Investment Trusts (REITs) and sale-leaseback deals

Ans: C

8 An example of can be seen when banks perceive themselves as “too big to fail” Such banks behave differently than if they perceived that they would have to pay the consequences for their sometimes risky actions In the run-up to the Economic Crisis of 2008, many major financial institutions in the US took on enormous amounts of debt to amplify the gains they were making because they misperceived that the federal government would provide a bail-out for their firms if things turned bad

A) ethical vice

B) Lex Mercator

C) moral hazard

D) judicial imperative

E) habeas corpus

Ans: C

9 The Efficient Market Hypothesis,

A) proposes that it is impossible for markets to be wrong because the price of any security represents all the information held by individuals in the market

B) works well in market bubbles

C) takes as an assumption that homo sapiens rather than automatons populate markets

D) has only recently displaced the adaptive markets hypothesis

E) was developed by Sir Richard Branson

Ans: A

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10 When the EMH has dominated market thinking, three illusions tend to come to life and intensify over time These are the illusions of market

A) segmenting, targeting and positioning

B) harmony, stability and predictability

C) agency, brokering, and fairness

D) equitableness, justice and objectivity

E) thinking, affect and action

Ans: B

11 Lessons to be learned from the Great Recession include

A) the complexity of markets can overwhelm elites

B) everyone lost money in the crash of the housing bubble

C) complex systems must be developed so that they are more resilient

D) all of the above

E) a and c only

Ans: E

12 At the Federal Open Market Committee meeting on October 28 and 29, 2008, the members

of the Board of Governors and the presidents of the Federal Reserve Banks provided projections

for economic growth, unemployment, and inflation in 2008, 2009 This meeting occurred after

1) the federal take-over of Fannie Mae and Freddie Mac, 2) the bankruptcy of Lehman Brothers, and 3) the announcement of the $700 billion Troubled Assets Relief Program (TARP) to rescue the financial system At this time,

A) economists for the Federal Reserve Bank fully understood what the impact of the Economic Crisis of 2008 would be

B) the top five regulators of the Security and Exchange Commission were dismissed

C) media sources, such as CNBC, broke the news of a major scandal involving Al-Queda’s ownership of major blocks of stock for Bank of America

D) Bono announced that Project Red had finally broken even in its effort to reduce HIV/AIDS E) elite economists failed to forecast the extent of the negative impact of the Economic Crisis of

2008 on the U.S economy

Ans: E

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13 Former Federal Reserve Chairman Alan Greenspan offers a simple solution to prevent financial crises He proposes that

A) the Security and Exchange Commission be vested with the same powers as the FBI

B) financial institutions should hold much more capital than they have in the past, so that they can draw on that money in times of crisis

C) C-SPAN should carry every meeting of the Federal Open Market Committee live

D) financial derivatives, such as options, futures, and standardized products, should be banned E) firms should carry sufficient cash balances so that they do not need to enter financial markets Ans: B

14 A network of individuals, groups and/or entities embedded in a social matrix that are

focused upon economic exchange are _ Notably, these are ubiquitous and have the primary role of putting in place assortments of goods, services, experiences, and ideas

A) agent middlemen

B) functional distributors

C) marketing systems

D) segmenting systems

E) positioning elements

Ans: C

15 Resource-Advantage Theory challenges neoclassical economics’ view of

A) the trade-off between private goods and public goods

B) general equilibrium and the inherent stability of market economies

C) the inherent tension between the private sector and the public sector

D) what Adam Smith imparted in The Wealth of Nations

E) marginal utility

Ans: B

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16 The _ and imparted to entrepreneurs and marketers in RA Theory is in marked contrast to the _that inevitably is imparted about firms in markets

characterized by perfect competition as defined by neoclassical economics

A) accounting and finance ability; wisdom

B) tactics and strategy; quality of goods

C) autonomy and personal agency; passivity

D) securities and exchange; dividend

E) compliance and conformity; aggressiveness

Ans: C

17 In RA Theory, an important idea is that competition is _ and _ It is a

constant struggle for a comparative advantage in resources that will yield a marketplace position

of competitive advantage, and thus, superior financial performance

A) sporadic and recursive

B) linear and asymptotic

C) nonlinear and convex

D) disequilibrating and ongoing

E) climactic and final

Ans: D

18 All of the following are precepts of RA Theory EXCEPT

A) Demand is heterogeneous across industries, heterogeneous within industries, and dynamic B) Resource characteristics are heterogeneous and imperfectly mobile

C) Role of management is to determine quantity and implement the production function

D) Human motivation is constrained self-interest seeking

E) Resource characteristics are heterogeneous and imperfectly mobile

Ans: C

19 One emerging thrust in economics is the adaptive markets hypothesis (AMH) Based on evolutionary science, AMH views markets

A) not as efficient in the way that EMH does, but as fiercely competitive

B) as inherently stable

C) as the elasticity of supply and demand

D) as primarily based on atomistic transactions

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E) only as formal environments such as Wall Street or the Chicago Board of Trade

Ans: A

20 All of the following are true EXCEPT

A) Markets are not perfect

B) They are always rational

C) Markets are dynamic

D) Markets are evolutionary

E) Governments will be involved in markets

Ans: B

21 In 2006, when J Kyle Bass sat down with investment banks dealing in exotic derivative contracts and asked what kind of home-price appreciation were they modeling they said

A) they weren’t using models to make such investment decisions

B) ‘six to eight percent a year’ in perpetuity

C) ‘five percent for the next ten years’

D) some said home prices would appreciate while others said home prices would decline

E) it depended on what the Federal Reserve Bank forecasted about interest rates

Ans: B

True/False

26 True or False Former Federal Reserve Chairman Alan Greenspan admitted his mistake as being he believed financial institutions would act in their own self-interest and therefore avoid risky lending that put them into so much trouble in the Autumn of 2008

Ans: True

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27 True or False The US government refused to allow GMAC, the auto lender, and CIT, a lender to businesses, to become bank-holding companies

Ans: False

28 True or False Because of the severity of the situation, the federal government’s $700 billion Troubled Assets Relief Program (TARP) legislation passed almost unanimously when it was first considered by the U.S House of Representatives on September 28th, 2008 This was because representatives understood what Wall Street meant to the rest of the United States

Ans: False

29 True or False The decline in home prices in the Great Recession, actually wound up boosting the equity U.S households had in their homes (the debt on their homes minus their value of them) by $5.1 trillion

Ans: False

30 True or False The earthquake in the financial and product markets around the world called the Economic Crisis of 2008 actually began in a market for goods in the U.S.—local real estate markets

Ans: True

31 True or False Nearly all the participants in the housing bubble were acting “in their rational self-interest.”

Ans: True

32 True or False The EMH has proven to be a powerful idea in explaining financial market behavior in good times

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Ans: True

33 True or False In The Age of the Unthinkable, Joshua Cooper Ramo proposes that complex

systems, despite their apparent instability, cannot come out of balance

Ans: False

34 True or False Perfect competition is a concrete concept that is useful to work out many managerial economic issues, but doesn’t exist in the realm of abstract theory for economics Ans: False

35 True or False Neoclassical economics paints marketing practice in a dark way as market segmentation strategies are viewed as distorting consumer demand and providing lower value to consumers

Ans: True

36 True or False According to RA Theory, consumer information is perfect and costless Ans: False

37 True or False RA Theory lines up with Service-Dominate Logic (S-D Logic) as it

recommends that marketers do things with consumers and other businesses, rather than to

consumers and other businesses

Ans: True

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38 True or False RA Theory stands to move scholars and students to machine metaphors for the economy (along with all of the accompanying associations about precision, reliability, and stability)and away from metaphors related to living and evolving ecosystems (with

accompanying associations of uncertainty in the environment, and the imperative that successful actors in the environment bring resourcefulness and creativity in order to survive)

Ans: False

39 True or False In September 2007, Bass testified before a House subcommittee investigating ratings agencies He complemented precision of these agencies’ valuation models and cited their common interests with the investment banks for strengthening the soundness of the US financial system

Ans: False

40 True or False According to J Kyle Bass, he made a very simple bet, and that very simple bet was that synthetic-CDO managers were over-levered, and they had no idea what they owned Ans: True

Fill-In-The-Blank

41 With the glare of television lighting, former Federal Reserve Chairman Greenspan appeared uncharacteristically chastened and a bit bewildered by the sudden downturn in US financial markets Under hard questioning by committee Chairman Henry Waxman (D – Los Angeles), Alan Greenspan admitted that in light of a “once-in-a-century financial tsunami,” he had

_

Ans: found a flaw in his market ideology

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42 The bankruptcy of investment bank was the largest such filing in U.S history at $600 billion

Ans: Lehmann Brothers

43 Economists described the events of _as the most remarkable period of government intervention into the financial system since the Great Depression

Ans: the Fall of 2008

44 The effects of the current financial crisis shook thirty years of trust in minimally-regulated markets that had accrued in the minds of American consumer-citizens Almost overnight, a cloud of suspicion settled over _ideology

Ans: free-market

45 Beyond the borders of the US in late 2008, the three banks of all failed Banks all over the world drastically cut back lending as the tumult unfolded

Ans: Iceland

46 A occurs in markets where home prices rise faster than wage levels in local real estate markets

Ans: housing bubble

47 By October 2010, China had become the top foreign investor in US Treasuries by owning

$1.175 trillion of U.S Treasury securities, while Japan claimed second by owning $882.3 billion

in December 2010 All of this suggests that foreign governments enabled

in the US to remain low in the U.S thereby partly fueling the housing bubble