How did the increase in the interest rates in the early 80s contribute to the S&L crisis?
What will be an ideal response?
The S&Ls suffered from an interest-rate risk problem. They had many fixed-rate mortgages with low interest rates. As interest rates in the economy began to climb, S&Ls began to lose profitability. Because of deregulation and financial innovation, it became possible for the S&Ls to undertake more risky ventures to try to regain their profitability. Many of them lacked expertise in judging credit risk in the new loan areas resulting in large losses.
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According to the classical economists, an economy producing $15 trillion in goods and services
A) may be producing too much since the needs of people may not be this great. B) could experience a permanent glut if no one has estimated the demand for goods and services in the economy. C) simultaneously generates the income necessary to purchase $15 trillion in goods and services. D) is supplying $15 trillion in goods and services, but could be demanding more or less than $15 trillion in goods and services for a very long period of time.
In the loanable funds market, what variable changes to eliminate a shortage of loanable funds and how is the shortage eliminated?
What will be an ideal response?
If reservation prices are positively correlated, then
A) pure bundling cannot increase a firm's profit. B) pure bundling can increase a firm's profit. C) it is unclear whether or not pure bundling can increase a firm's profit. D) consumers lose leverage over firms.
After much consideration, you have chosen Ireland over Spain for your Study Abroad program next year. However, the deadline for your final decision is still months away and you may reverse this decision. Which of the following events would prompt you to reverse this decision?
a. The marginal benefit of going to Spain increases. b. The marginal cost of going to Spain increases. c. The marginal benefit of going to Ireland increases. d. The marginal cost of going to Ireland decreases.