Explain why a bank manager and a bank regulator would likely view the timing at which a loan should be charged to the loan loss reserve differently.
What will be an ideal response?
The loan loss reserve is part of a bank's capital. A loan is part of a bank's assets. To charge a loan against this reserve will reduce both the bank's assets and its capital. A manager will try to avoid this scenario. Regulators, on the other hand, are more concerned with the bank's ability to meet its obligations, including the liquidity needs of its depositors. Non-performing loans, while they may appear as an asset are really not. The regulators would rather charge these off to the loan loss reserve and obtain a clearer view of the bank's actual capital position and its ability to meet its obligations and also to withstand a shock.
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Which of the following is part of an economic model?
A) assumptions B) norms C) preferences of economic agents D) opinions
The policy ineffectiveness proposition of the new classical model suggests that ________
A) unanticipated policy has no effect on the business cycle B) anticipated policy can have an effect on the business cycle C) anticipated policy has no effect on the business cycle D) legislative policy initiatives have little effect if the executive branch of government is in the hands of another political party
Concerning the labor market and taxes on labor, economists disagree about
a. the size of the tax on labor. b. the size of the deadweight loss of the tax on labor. c. whether or not a tax on labor places a wedge between the wage that firms pay and the wage that workers receive. d. All of the above are correct.
In the 1990s, Fed Chair Alan Greenspan believed that the market was
a. undervalued, and evidence later showed that this was clearly correct. b. undervalued, but whether it was remains debatable. c. overvalued, and evidence later showed that this was clearly correct. d. overvalued, but whether it was remains debatable.