How is a financial crisis like a power blackout?
What will be an ideal response?
A blackout occurs when a breakdown at one or more points in the power grid causes strain at other points. As these fail, the entire system can collapse. The failure of a single financial institution disrupts the functioning of others, with an inherent tendency for the weakening to spread and intensify. The deterioration of financial institutions' balance sheets, in particular, is contagious. Restoring power requires both removing the initial cause (e.g., power lines downed in a storm) and reestablishing normal operations at all the points affected indirectly.
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The idea that investment in comprehensive education in developing countries leads to permanent increases in the rate of technological progress is an example of
A) a trade-off between human capital and technology. B) increasing economic inequality. C) capital deepening. D) new growth theory.
Beachcomber Beatrice spent her entire wealth of $100,000 to build a beach house on the Gulf of Mexico. There is a 10 percent chance that the house will be destroyed by a hurricane. Beatrice's utility of wealth schedule is given in the table above
What is the maximum amount that Beatrice would be willing to pay for an insurance policy that pays $100,000 if her beach house is destroyed by a hurricane? A) $10,000 B) $30,000 C) $40,000 D) $60,000
In a recession, automatic stabilization ________ tax revenues and ________ the debt-GDP ratio
A) lowers, raises B) lowers, lowers C) raises, raises D) raises, lowers
Regarding income distribution and the distribution of wealth
A. wealth is a stock concept and income a flow concept. B. income, a flow, can be viewed as a return on wealth. C. a stock is evaluated at a given moment in time; a flow is evaluated during a period of time. D. All of these are correct.