Here are the answers to the somewhat astonishing quiz, published on the Fisher Investments blog on June 12 2007 .

Answers to the quiz on the 2008/09 financial crisis

Answer: D) Between 3 and 5%. US Unemployment has been near historical lows for some time, hovering around the 4.5% mark. The rate even held steady or fell during the time of housing and credit turmoil. In fact, we observe that many employers today are clamoring for talent because the pool of available workers is so tight. 4.5% is close to what the Fed would call full employment. There is a natural amount of turnover in the employee base, and a rate much lower than todays could actually affect the economy adversely. It doesnt get any better than this!

2) True or False: Inflation is accelerating in 2007.

Answer: False. Inflation has remained benign for over a decade now. In 2007, inflation is tracking well below 3%. Often folks point to spikes in food prices and energy as a sign of rampant inflation. But inflation is not about single goods—its about aggregate price levels. Plenty of common goods are experiencing significant price drops today—from autos to electronics to textiles. On balance, price increases remain tame.

3) What was GDP growth for the second and third quarters of 2007?

Answer: C) 3.8% and 4.9%. Particularly in the last two quarters (the time of the so-called credit crisis and acceleration of the housing slump), GDP has scorched expectations with some of the strongest growth seen in the current expansion. Consumption, exports, and a variety of other factors are showing strength. And the prosperity isnt contained in the US. The global economy is chugging right along with it.

4) True or False: The dollar is having its worst year ever.

Answer: False. Not even close. The dollar is down less than 10% to the euro and other major currencies so far this year. Currency fluctuations. and annual moves bigger than what weve got today are common. Anyway, a falling or appreciating dollar doesnt make much difference for the stock market or the economy. There are plenty of benefits to a weak dollar, including stronger earnings from abroad, and more competitive exports.

5) True or False: Because of the credit crisis and market illiquidity, interest rates have spiked this year.

Answer: False. Most major interest rates are flat or down this year—simply not the stuff of a true credit crisis. Short-term Fed funds and 10-year treasuries are well below where they started 2007. Even AAA and BBB rated corporate bonds are flattish. Only high yield debt has spiked of late—but the spike has been very modest by historical standards. On balance, the cost of debt remains well below its 40 year average.

6) What percentage are subprime mortgages of the total mortgage market?

Answer: B) 10%. Subprime accounts for only about 10% of the total first-lien US mortgage market. Therefore, a full 20% of subprime defaults (an extremely unlikely outcome) would dent the mortgage market by 2%. The total subprime market is about $800 billion, or 6% of one year of GDP. So, if we wiped out all subprime debt for good, the effect on the economy would total 6% of one year of the countrys product. Thats pretty tiny in the big picture.

7) True or False: Financials are set to have their second best year ever for earnings.

Answer: True. Despite a big earnings dip in the third quarter tied mostly to one-time asset write-downs, Financials as a sector is poised to have one of its best earnings years on record.

8) S&P 500 earnings growth for 2007 is expected to:

Answer: A) Grow well over 5% from a year ago. S&P 500 earnings growth will likely remain above the rate of GDP for another year. Again, extracting one-time problems from the Financials industry, earnings have been strong, with many industries experiencing record results.

And how did the authors of this quiz conclude the article? With the kind of overbearing optimism that should have screamed to any readers that the bull market was well and truly over:

“We think a lot of folks who believe the economy is in dire trouble would fail this quiz. But those are the facts. Maybe this is enough evidence for you, maybe not. Either way, we urge you to follow the data and not the talking heads before proclaiming woe. Economic fundamentals remain strong throughout the globe, as do stock market prospects. Its a great time to be invested. ”

How wrong they were. Four months after this quiz was published, the S&P 500 peaked .