The Fed may also lend to insolvent banks, rather than winding them down, in order to:
A. keep financial markets guessing about its strategy.
B. address the problem of systemic risk.
C. keep the money supply from falling too much.
D. secure politically powerful allies.
Ans: B. address the problem of systemic risk.
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The substitution effect of a price change refers to
A) the change in quantity demanded that results from a change in price making a good more or less expensive relative to other goods that are substitutes. B) the shift in the demand curve due to a change in purchasing power brought about by the price change. C) the movement along the demand curve due to a change in purchasing power brought about by the price change. D) the shift of a demand curve when the price of a substitute good changes.
In an economy without government or a foreign sector it is always true that
A) actual saving equals actual investment. B) actual saving equals desired investment. C) desired saving equals desired investment. D) desired saving equals actual investment.
For a retailer buying from a wholesaler, volume discounts do not violate the Robinson-Patman act because
a. To sell larger volumes, the retailer himself has to offer discounts b. To sell larger volumes, the retailer has to incur costs in promoting the item c. To sell larger volumes, the retailer has to hold the items in inventory longer d. All of the above
Suppose that you charted the rate of unemployment on the same graph. How would you expect the graph of unemployment to look in comparison?
a. It would be similar but shifted slightly to the right.
b. It would be inverted but shifted slightly to the right.
c. It would be similar but shifted slightly to the left.
d. It would be inverted but shifted slightly to the left.