Bankers have a reputation for conservatism in politics, dress, and business affairs. Is there an economic rationale for this conservatism? Explain
There is an economic rationale for this conservatism. Checking deposits are pure fiat money. These deposits are backed by nothing more than a particular bank's promise to convert them into currency on demand. If people lose trust in a bank, then it will lead to the danger of a run. The danger of a run on the bank has induced bankers to keep prudent norms and to lend out money carefully. They achieved the prudence through two principal ways. First, they maintained a sufficiently generous level of reserves to minimize their vulnerability to runs. Second, they were cautious in making loans and investments, because any large losses on their loans would undermine their depositors' confidence.
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A risky small business stands the best chance of finding external financing from
A) a commercial finance company. B) a commercial bank. C) an investment bank. D) trade credit.
The father of general equilibrium theory is considered to be:
A. Kenneth Arrow. B. Gerard Debreu. C. Leon Walras. D. John Nash.
In maximizing economic profit, the monopolist will
A) choose the highest price that still permits some output sales. B) equate marginal cost to minimum average total cost. C) equate price to marginal cost. D) equate marginal revenue to marginal cost.
If marginal cost equals marginal revenue on the downward-sloping segment of the marginal cost curve, then increasing production until marginal cost again equals marginal revenue, this time on the upward-sloping segment of the marginal cost curve, is a profit- maximizing decision
Indicate whether the statement is true or false