How does moral hazard contribute to high bank leverage?
What will be an ideal response?
First, bank managers are typically compensated at least partly on the basis of their ability to provide shareholders with a high ROE. Second, federal deposit insurance has increased moral hazard by reducing the incentive depositors have to monitor the behavior of bank managers.
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Alchemy was the attempt to discover a process by which base metals, such as lead, could be turned into gold. If an alchemist had been successful,
A) all the lead in the world would have been added to the world's gold supply. B) all the lead in the world would have replaced the world's gold supply. C) all the lead in the world would only have been added to the world's gold supply when it was converted to gold. D) the alchemist would likely have been killed by the owners of real gold.
In the short run, monopolistically competitive firms will maximize profits by:
A. acting like perfectly competitive firms. B. acting like monopolists. C. playing strategic games like oligopolists. D. None of these statements is true.
A cost or benefit of a good imposed on people other than the consumers or producer of a good is called a(n):
A. public good. B. merit good. C. private good. D. externality.
If the supply of labor increases, which of the following events will occur?
A. The wage rate will increase and firms will increase employment up until the point where MRP equals the new wage rate. B. The wage rate will increase and firms will decrease employment to the point where MRP equals the new wage rate. C. The wage rate will fall and firms will decrease employment to the point where MRP equals the new wage rate. D. The wage rate will fall and firms will increase employment up until the point where MRP equals the new wage rate.