Describe the role of bank leverage in bank insolvency during times of falling asset prices
As bank asset values fall, the effect on bank capital is amplified by the amount of bank leverage. In modern economies where banks operate with relatively high leverage ratios, only a small decrease in asset values can completely wipe out bank capital. The loss in value of mortgage-backed assets after the housing bubble burst in 2008, many banks faced insolvency. To help maintain stability in the banking sector, the Fed took an active role in adding liquidity to the banking system.
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The most common measure of productivity shocks used by real business cycle theorists is
A) the Solow residual. B) average labor productivity. C) the change in the capital stock. D) unit labor costs.
Which of the following business decisions will be made by firms that are price searchers but not those that are price takers?
a. What combination of resources should be used to produce a product that is supplied? b. What output should be produced? c. What price should be charged? d. What legal structure of business organization (for example, a proprietorship or corporation) should be used?
?If a shoe store earns more than a normal profit, its:
a. ?accounting profit is zero. b. ?accounting profit is less than its economic profit. c. ?economic profit is positive. d. ?economic profit must be greater than its accounting profit. e. ?economic profit is, therefore, equal to its accounting profit.
A barter economy refers to a situation in which goods and services are traded for other goods and services, with no money involved in transactions. The major shortcoming of a barter economy is
A) transactions cannot take place without money. B) the requirement of a double coincidence of wants. C) government has no way of collecting taxes. D) goods and services have no way of storing value.