What is the function of a bank examiner?
(A) To make sure banks are obeying laws and regulations.
(B) To carry on day-to-day functions within the bank.
(C) To respond to banks about their daily reports to the Fed.
(D) To oversee decisions about major loans by each bank.
Ans: (A) To make sure banks are obeying laws and regulations.
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Suppose you obtain a fixed rate mortgage during a period of relatively high inflation. During the next ten years, inflation falls. Are you a winner or a loser due to inflation? Explain why
What will be an ideal response?
Monitoring
a. Gives the principle a better performance evaluation metric b. Allows the principle to better align the incentives of the agent with the goals of the principle c. Can be costly for the principal d. All of the above
The following is NOT an example of a potential monitoring solution to moral hazard
a. a pre-hire typing test for clerical employees b. closed circuit TVs throughout a warehouse c. GPS tracking devices in repair trucks d. listening in on call center conversations
Most economists would agree that, unless it incorporates rational expectations or something like it, a model cannot account for
A) the Great Depression. B) shifts in aggregate supply. C) the relationship between consumption and income. D) the stagflation of the 1970s. E) the different initial impact of a permanent versus a temporary policy change.