In 2008, the Treasury and Federal Reserve took action to save large financial firms such as Bear Stearns and AIG from failing. Which of the following is one reason why these measures were taken?
A) The Emergency Economic Stabilization Act required the Fed and the Treasury to provide financial assistance to firms that participated in regular open market actions with the Fed.
B) The bankruptcy of a large financial firm would force the firm to sell its holdings of securities, which could cause other firms that hold these securities to also fail.
C) The Fed and the Treasury wanted to allow Freddie Mac and Fannie Mae more time to buy the firms before they went bankrupt.
D) The failure of these firms would have forced the Fed to increase interest rates, which could have led to a severe recession.
Answer: B
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France is considering implementing policies that will reduce the duration of job search. A possible option is for France to
A) reduce unemployment benefits. B) help negotiate higher union benefits for employed workers. C) increase the minimum wage. D) require all residents between the ages of 19 and 26 to obtain a part-time or full-time job. E) Both answers A and B are correct.
When a business produces a product that creates external costs
A) the company produces a level of output larger than would be produced without the external cost. B) the company produces a level of output smaller than would be produced without the external cost. C) the company produces a level of output which would be the same as it would produce without the external cost. D) the market provides the efficient level of output even with the existence of the external cost.
When the price of a good rises, the demand for its complements will tend to rise
Indicate whether the statement is true or false
The reservation price of good X is
A. the price at which one would be indifferent between good X and simply keeping the money. B. the cost of producing good X. C. the market price for a good. D. any price above what you would be willing to pay for the good.