Explain the forces that caused the savings and loan debacle in the latter half of the 1980s
What will be an ideal response?
Deposit insurance created a moral hazard problem in which savings institutions had an incentive to make riskier loans than they would have made in the absence of deposit insurance. In addition, because their deposits were federally insured, depositors of savings institutions had less incentive to monitor the risks incurred by the managers. As a result, the institutions extended large amounts of high-risk loans, many of which generated losses that resulted in failures by numerous institutions.
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In an unregulated competitive market, the presence of marginal external benefit from a good or service results in less than the efficient quantity being produced
Indicate whether the statement is true or false
New smartphone applications are developed to help consumers find the cheapest prices in the neighborhood. Therefore,
A) the local competitive will become more intensive. B) the prices of goods listed in the application will be lowered. C) price discrimination will occur against consumers without a smartphone or this application. D) All of the above.
Variability in exchange rates of currencies used in international trade
A. causes a complete breakdown of trade. B. renders the theory of gains from trade null in practice. C. brings with it a host of complications in trade policy. D. has no impact on trade.
The two words most often used by economists are
a. prices and quantities. b. resources and allocation. c. supply and demand. d. efficiency and equity.