How does Federal Deposit Insurance Corporation (FDIC) cause moral hazard in the banking industry?
A. Depositors do not evaluate the health of a bank when they make a deposit because they are assured that they get their money back.
B. Money managers of a bank will make more risky loans because they know that if their investments fail, the government will reimburse the depositors.
C. The Federal Reserve (our central bank) does not monitor banks because they know the FDIC covers all deposits.
D. Depositors do not evaluate the health of a bank when they make a deposit because they are assured that they get their money back and Money managers of a bank will make more risky loans because they know that if their investments fail, the government will reimburse the depositors are both correct.
Answer: D
You might also like to view...
Sunshine's Organic Market sells organic produce. Assume that labor is the only input that varies for the firm. The store manager has determined that if she hires 5 workers, the store can sell 150 pounds of produce per day. If she hires 6 workers, the store can sell 170 pounds of produce per day. The store earns $4 for each pound of produce that it sells, and the manager pays each worker $60 per
day. Which of the following is not correct? a. For the 6th worker, the marginal product is 20 pounds of produce per day. b. For the 6th worker, the marginal revenue product is $20 per day. c. The store earns a higher profit by employing 6 workers than by employing 5 workers. d. Assuming no changes in either the daily wages paid to store workers or the price at which the store sells its produce, the firm would maximize profits by hiring a 7th worker so long as the store can increase its sales to at least 185 pounds per day.
The main factor in determining how much one plot of land is worth relative to another plot is
A. its fertility. B. the average amount of rainfall. C. its location. D. None of the choices are true.
All other factors held constant, an investment:
A. with less risk should sell for a lower price and offer a lower return. B. with more risk should offer a lower return and sell for a higher price. C. with less risk should sell for a lower price and offer a higher expected return. D. with more risk should sell for a lower price and offer a higher expected return.
If the CPI is now 95, then prices have _____ since the base year.
A. fallen by 95 percent B. fallen by 5 percent C. risen by 5 percent D. risen by 95 percent