When the Fed makes a discount loan, the impact on the Banking System's balance sheet will reflect:
A. an increase in assets and a decrease in liabilities.
B. an increase in assets and liabilities.
C. an increase in liabilities with no change in assets.
D. a decrease in assets and an increase in liabilities.
Answer: B
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The lending ability of commercial banks increases when the ________.
A. discount rate is raised B. Fed buys securities in the open market C. Treasury collects tax revenues D. reserve requirement is raised
A situation where a member of Congress votes to approve a bill in exchange for favorable votes from other members on other bills is called
A) logrolling. B) special interest legislation. C) regulatory capture. D) rent seeking.
To reduce moral hazard problems, banks include restrictive covenants in loan contracts. In order for these restrictive covenants to be effective, banks must also
A) monitor and enforce them. B) be willing to rewrite the contract if the borrower cannot comply with the restrictions. C) trust the borrower to do the right thing. D) be prepared to extend the deadline when the borrower needs more time to comply.
If the cross price elasticity of demand for fries with respect to hamburgers equals -1.2, then: a. a 1% increase in the quantity of hamburgers purchased will lead to a 1.2% increase in the price of fries
b. a 10% increase in the price of a hamburger will lead to a 12% increase in the quantity of fries demanded at a given price. c. a 1% decrease in the price of a hamburger will lead to a 1.2% increase in the quantity of fries demanded at a given price. d. a 10% increase in the quantity of hamburgers purchased will lead to a 12% increase in the price of fries.