Economics (MindTap Course List)
13th Edition
ISBN: 9781337617383
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
- Considering 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_forwardHow a decline in housing prices can trigger the subprime financial crisis in advanced economics? Explain in detail.arrow_forward
- One of the tasks of a Financial System include providing affordable loans to all consumers and firms.True or Falsearrow_forwardList any six categories of factors that could cause a financial crisis.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_forward
- Monetary and fiscal policies directly affect the level of activities in the financial market. Is it true or false?arrow_forwardInvestment projects can be viewed as analogous to bank loans. True or false?arrow_forwardDuring the 2007-2009 period, the US government made its most dramatic interventions in financial markets since the 1930s. It has been argued that the current crisis could redraw the boundaries between government and markets. For some, “freer and more flexible markets will still do more for the world economy than the heavy hand of government” whereas for others “big banking crises are ultimately solved by early and decisive government action and financial regulation.” Evaluate these positions.arrow_forward
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Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning