During the 2009 euro crisis, a number of countries had private banks that had become too "big to save." Explain
What will be an ideal response?
A private bank is too big to save if the resources available to the home government through the central bank are insufficient to prevent bank failure. Essentially, saving the private bank would lead to a sovereign default by a countries government and so was not feasible.
You might also like to view...
If assets are imperfect substitutes, then an increase in the amount of domestic currency bonds held by the public will ________ the risk premium and ________ the amount of domestic currency bonds held by the central bank
A) increase; leave unchanged B) increase; decrease C) increase; increase D) decrease; decrease E) leave unchanged; decrease
According to the balance of payments schedule, as the level of income rises
a. import demand increases while export demand does not. b. export demand increases while import demand decreases. c. both import demand and export demand increase. d. both import demand and export demand decrease.
After building a city street, street owners (government) are unable to exclude anyone from using the street. Therefore, a city street is a
a. exclusive good b. rival good c. private good d. nonexclusive good e. merit good
One conceptual problem in assigning assets to M1, M2, and so on, is
A. distinguishing money from “near monies.” B. the problem of measuring asset size. C. the need to agree on a unit of account. D. the different size of financial assets.