Explain how bank regulators seem to face a bit of a paradox regarding preventing monopoly power by banks and spurring competition.
What will be an ideal response?
One of the goals of banking regulators is to prevent any bank from growing so large that it effectively becomes a monopoly in its geographic market. Monopolies are inefficient and are seldom of benefit to consumers. On the other hand, while we usually think of competition as being beneficial to consumers because it results in low prices and new products, within the financial industry competition can cause banks to seek other ways to earn profits, which may expose the bank to greater risk, and threaten the integrity of not just one institution but the entire system.
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A key assumption of most economic analysis is that people are altruistic, meaning that they act in their own self-interest
Indicate whether the statement is true or false
Compared to setting a single price, if a firm can price discriminate it
A) makes a larger economic profit. B) makes a lower economic profit. C) makes zero economic profit. D) has no change in its economic profit from when it set a single price. E) might increase, decrease, or not change its economic profit depending on whether as a single-price monopoly its marginal revenue curve was above, below, or the same as its demand curve.
If the Fed purchases $1 million worth of securities and the required reserve ratio is 8%, by how much will deposits increase (assuming no change in excess reserves or the public's currency holdings)?
A) rise by $1 million B) decline by $1 million C) rise by $8 million D) rise by $12.5 million
Keynes argued that the factors that make up aggregate demand are stable and do not change unexpectedly.
Select whether the statement is true or false. A. True B. False