The CAMELS criteria to evaluate the health of banks by supervisors is not made public. Make a case for one making this information public and a case for keeping it private.
What will be an ideal response?
The case for making it public would be to encourage the managers of banks to do whatever is necessary to earn a high rating to keep depositors and to attract investment capital. This information would go a long way toward treating the moral hazard problem. The case for keeping it private is to avoid a run on the bank. If a bank is having difficulty, regulators may have the opportunity to work with the management to solve the problem and avoid a bank run which is likely to push the institution into insolvency and end up costing some depositors and taxpayers more than it would have if they work the problems out without public scrutiny.
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Which measure of inflation would include consumer goods and capital goods?
A. the Consumer Price Index B. the Retail Trade Survey C. the GDP Price Index D. the Employment Cost Index
New Keynesian inflation dynamics can account for sluggish responses of
A) real GDP to variations in aggregate supply. B) real GDP to variations in aggregate demand. C) inflation to variations in aggregate supply. D) inflation to variations in aggregate demand.
In fractional reserve banking:
a. bank assets are less than bank reserves. b. only a fraction of total deposits are bank reserves. c. only a fraction of required reserves are investor assets. d. bank loans are less than bank reserves. e. a fraction of bank reserves needs to be backed by gold.
When there is a positive externality associated with the watering of one's lawn, the free market results in:
A. not enough lawn watering. B. too much lawn watering. C. the socially optimal level of lawn watering. D. government subsidies for lawn watering.