What Was the Purpose of the Stress Test Administered by the Treasury

question 48

Multiple Choice

What was the purpose of the stress test administered by the Treasury in 2009?

• A) Evaluate potential losses of Fannie Mae and Freddie Mac.
• B) Assess the viability of AIG.
• C) Gauge how well the largest financial firms would fare if the recession deepened.
• D) Evaluate the solvency of the major investment banks.

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Definitions:

Fixed Cost

Expenses that do not change in proportion to the volume of goods or services a company produces, such as rent, salaries, and insurance premiums.

Product Cost

The total cost associated with making or acquiring a product, including direct materials, direct labor, and overhead.

Period Cost

Costs that are not directly tied to the production process and are expensed in the period they are incurred, such as selling, general, and administrative expenses.

Fixed Cost

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance premiums.