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 Fed and the Treasury wanted to allow Freddie Mac and Fannie Mae more time to buy the firms before they went bankrupt.
B) 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.
C) 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.
D) The failure of these firms would have forced the Fed to increase interest rates, which could have led to a severe recession.
C
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Underlying economic theory is the idea that
A) people respond only to negative incentives, not to positive ones. B) choices are affected by both positive and negative incentives. C) value judgments do not play a role in the economic decisions people make. D) money is the only incentive that matters.
All of the following are barriers to entry in an industry EXCEPT
A) a patent. B) governmental restrictions. C) low marginal tax rates. D) economies of scale.
If imports and exports are equal, the net export line:
A. is horizontal at $0. B. is vertical at $0. C. is horizontal at the value of imports. D. slopes upward starting at the value of exports.
Every citizen in the United States should be required to become licensed to carry a firearm for the sake of protection. This statement is best described as
A. a positive statement. B. an implication of an efficient market. C. a normative statement. D. a marginal statement.