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Test your economic IQ

Subprimes and bailouts and default swaps, oh my! Halloween has come early with plenty of tricks for your 401(k) accounts. So have you been paying attention to the turns in the market, the turbulence in the local economy and the political debates du jour? Grab your pencil, your Fed beige book and your tissues. Time for an Economics 101 quiz:

1. The 679-point drop in the Dow Jones Industrial Average on Thursday was the biggest one-day fall in:

a. A generation

b. A decade

c. A year

d. A little over a week

2. Which company active in the Tampa Bay area has filed for bankruptcy?

a. Arigato Japanese Steak House

b. Bill Heard Chevrolet

c. Shells Seafood

d. Creative Loafing

e. All of the above

3. The phrase "nine equals eight'' refers to:

a. A math rule employed by Wachovia accountants.

b. The mantra that Rays skipper Joe Maddon coined to propel the team to the postseason.

c. How Lehman Bros. managed to leverage itself to the hilt.

d. A daily formula to downwardly revise the value of your 401(k).

4. Which of the following bay area stocks suffered the most this past week?

a. Superior Uniform Group

b. SRI/Surgical Express

c. Aerosonic

d. Quality Distribution

e. GeoPharma

5. What is a credit default swap?

a. An insurancelike contract used by investment banks to shield themselves from potential losses in securitized loans.

b. When two companies in bankruptcy agree to trade their debts.

c. The good ol' way to buy a house with no money down while yanking out 125 percent equity.

d. An arcane financial instrument that is much too difficult for anyone not working on Wall Street to understand ­— but trust us, it works.

6. The biggest bank in history to fail was:

a. Countrywide

b. IndyMac

c. Washington Mutual

d. SubPrime Loans ''R'' Us

7. Match the amount of the exit package with the troubled financial institution's CEO at the time.

a. $22-million (declined)

b. $24-million

c. $13-million

d. $8-million

e. $19-million

f. $9-million

• John Thain, Merrill Lynch

• Robert Willumstad, AIG

• Daniel Mudd, Fannie Mae

• James Cayne, Bear Stearns

• Richard S. Fuld, Lehman

• Alan Fishman, Washington Mutual

8. Complete the sentence: As of Friday's close, the Dow had fallen about ___ from its peak of 14,164.53 a year ago.

a. 25 percent

b. 30 percent

c. 35 percent

d. 40 percent

9. Which of the following has spiked highest in recent history?

a. Employment

b. The LIBOR

c. Oil prices

d. Retail sales

e. Visitors to Pinellas County

10. In a phrase, Federal Reserve Chairman Ben Bernanke's money-moving strategy to revive the economy can be summed up as:

a. Lend and spend

b. WWGD (What Would Greenspan Do?)

c. Drill, baby, drill

d. More cowbell

Bonus question

Is this statement true or false?

The United States is in a recession.

Answers and scoring

(Give yourself a point for each correct answer/match.)

1. D. The Dow plunged 777 points on Sept. 29.

2. E

3. B

4. B (down 52 percent)

5. A

6. C

7. Thain, F; Willumstad, A; Mudd, D; Cayne, C; Fuld, B; Fishman, E.

8. D

9. B. The LIBOR, or London interbank offered rate that banks charge each other for loans, has soared — a telltale sign of a credit crunch.

10. A

BONUS: Yes and no. It's not "technically'' a recession until there are two consecutive quarters of negative GDP growth and, because of the stimulus package, the second quarter was positive. But if you said yes, give yourself a point anyway. Most economists now are not questioning whether we're in recession, but how deep and how long it will be. "If you're worried about a recession, don't,'' says Raymond James chief economist Scott Brown. "Looks like we're already there.''

How to calculate your score

0 to 3: Time to buy a newspaper, click on the Internet, or at least turn the channel from Dancing With the Stars.

4 to 7: You may know more about the crisis than some in Congress, but don't get cocky.

8 to 12: Congratulations. You have a firm enough grasp of the economic situation to be really scared.

13 to 16: Hammering Hank Paulson will soon be knocking on your door for advice on Bailout Package, Part II.

Test your economic IQ 10/10/08 [Last modified: Friday, October 10, 2008 6:58pm]

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