When the government eliminated Regulation Q in the 1980s, allowing S&Ls to raise interest rates in order to keep their depositors from switching their deposits to competing investment houses, many S&Ls were doomed because
a. they were locked into fixed, long-term mortgage loans at rates often lower than what they paid depositors, forcing them into more risky but higher interest-yielding loanventures
b. they refused to finance (loan) speculative land development projects at a time when land values were skyrocketing, losing the opportunity to recoup losses caused by theelimination of Regulation Q
c. they ventured abroad, mainly to the Middle East, for prospective borrowers and fell victim to the political instability of those ventures
d. the Federal Reserve also raised interest rates, causing a general slowdown in the economy, which eventually affected S&L profitability
e. member savings and loans quit the FSLIC in protest of the new rules
A
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Making choices on the margin means
A) scribbling on the edges of your notebook paper. B) comparing all relevant alternatives systematically and incrementally. C) making a decision based on emotions. D) making decisions in the largest possible increments. E) taking account of all marginal benefits, all opportunity costs, and all sunk costs.
In the wake of the financial crisis of 2007-2009, the debt-to-GDP ratio has risen in many countries around the world. Should the expenditures enabled by this debt be considered government consumption or government investment?
What will be an ideal response?
If the demand for a good is price inelastic, a tax on it will
a. raise price, raise tax revenue, shift the supply curve to the right b. lower price, lower tax revenue, shift the supply curve to the right c. raise price, raise tax revenue, shift the supply curve to the right d. raise price, raise tax revenue, shift the supply curve to the left e. lower price, raise tax revenue, shift the demand curve to the left
Suppose two firms in a duopoly implicitly collude and charge a high price. How might each firm benefit from advertising that it will match the lowest price offered by its competitor?
A) The advertisement is meant to suggest to consumers that the offered price is actually the lowest price available. B) The offer to match prices is a way of signaling to antitrust authorities that the firms are not engaged in illegal collusion. C) The advertisement ensures that the other firm does not cheat. If a firm cheats on the agreement and charges the lower price, the rival firm will retaliate by doing the same. D) The offer to match prices is a way of deterring entry by other large firms, thereby keeping the market share of the existing firms intact.