More borrowing by firms in the domestic currency is one way to reduce currency mismatch. What would be the major issue if government insured repayment of the loans at a low cost?
A) There would be lots of new borrowing, and the production sector might not be able to keep pace.
B) It would be too expensive.
C) There could be a moral hazard problem with excessive risk taking.
D) It is likely that no new borrowing would take place—firms need the incentive of tax breaks.
Answer: C) There could be a moral hazard problem with excessive risk taking.
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A graph shows the price of a pound of cucumbers on the vertical axis and the quantity of new cars sold by Honda on the horizontal axis. The price of a pound of cucumbers remains constant as the quantity of new cars sold increases
The graph of these data is a A) vertical line. B) positively sloped line. C) curve with a maximum. D) negatively sloped line. E) horizontal line.
Suppose that the required reserve ratio is 10 percent and you withdraw $25,000 from Comerica Bank. What is the deposit multiplier? What is the total decrease in deposits in the banking system? What is the change in the money supply?
What will be an ideal response?
Which of the following transactions will be included in the financial account of the balance of payments of any country?
a. Travel and tourism expenses b. Import of goods c. Investment in stock d. Export of services e. Payment of insurance premium
According to the H-S definition of income, employer contributions are excluded from money income.
A. True B. False C. Uncertain