Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 18, Problem 8QP
To determine
Explain how the bailouts are referred to “double-edged sword”.
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The government, business and household sectors are all suppliers of funds into the financial system.
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- The demanders of funds participate in the financial market to earn profit. *True or False??arrow_forwardWhy has the government pumped billions into bank bailouts to prevent them from collapsing?arrow_forwardWould the interest rate increase be more likely to hurt or help the financial institution’s profitability?arrow_forward
- Why are companies' liquidity ratios calculated?arrow_forwardConsidering all the bailout money the public has been made responsible for, is the existence of banks and non-bank financial institutions worth it, or would it have been cheaper to the public to simply keep all our money under our mattresses?arrow_forwardThere is a growing concern among tax payers that ‘too big to fail’ (TBTF) creates moral hazard problems and leads to excessive risk-taking and reckless investment decisions by large financial institutions. This unfortunately exposes the tax payer and the economic system to excessive cost. What are the issues surrounding “too big to fail”? Is it possible for the legislative authority to simply “outlaw” TBTF institutions? Why or why not?arrow_forward
- How a decline in housing prices can trigger the subprime financial crisis in advanced economics? Explain in detail.arrow_forward“Fat finger” trades are sometimes blamed as the cause of “flash crashes” in financial markets. What do we mean by “flash crashes” and “fat finger trades”? What are other potential causes of flash crashes?arrow_forwardList any six categories of factors that could cause a financial crisis.arrow_forward
- True or False? Adam Smith believed that his concept of an “invisible hand” guiding human behavior applied to both goods markets and to financial markets. True or False ? Ben Bernanke believes that Milton Friedman and Anna Schwartz’s explanation of the causes of the Great Depression were silly and wrong.arrow_forwardWhy aren't more resources being allocated to sufficient prudential oversight of the financial system in order to rein in excessive risk-taking, when it is evident that such monitoring is necessary to avoid financial crises?arrow_forwardInvestment projects can be viewed as analogous to bank loans. True or false?arrow_forward
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