While many analysts defended the actions taken by the Fed and the Treasury to respond to the financial crisis in 2008, others were critical of these actions. The critics were concerned that by not allowing large firms to fail
A) smaller firms will resent not receiving similar assistance.
B) stockholders and bondholders of these firms were not allowed to receive the proceeds from the sale of assets that would have occurred if the firms had declared bankruptcy.
C) there is an increased likelihood that other firms will engage in risky behavior in the future with the expectation that they will also not be allowed to fail.
D) there will be less competition in the U.S. economy, which could led to higher prices for consumers.
Answer: C
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The existence of heterogeneous preferences for government is an economic argument for a federal system of government
a. True b. False
Prices play a role in a market
A) because they distribute scarce goods to those consumers who value them most highly. B) because when prices are in equilibrium, product shortages or surpluses can occur. C) because they help eliminate poverty. D) because they eliminate scarcity.
Under what circumstances would government loan guarantees be socially beneficial?
A. When the guarantees socialize losses and privatize gains. B. When the guarantees stimulate production of goods generating significant spillover costs. C. When the guarantees promote production of goods otherwise underproduced by the private sector. D. When the guarantees increase company profits.
Central banks that are relatively free from political interference, and are thus ________ likely to be time inconsistent, generally have a ________ record of achieving low inflation
A) more, better B) more, worse C) less, better D) less, worse