Why is it that a run on a single bank can turn into a widespread financial panic, or what the text identified as contagion?
What will be an ideal response?
The reason for the spread of panic or contagion is information asymmetries. It is due to the fact that most depositors cannot tell a healthy from an unhealthy bank. As a result, the safest thing for individuals to assume is their bank is unhealthy and to withdraw their funds.
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Answer the next question using the following budget information for a hypothetical economy. Assume that all budget surpluses are used to pay down the public debt. Government SpendingTax RevenuesGDPYear 1$450$425$2,000Year 25004503,000Year 36005004,000Year 46406205,000Year 56805804,800Year 66006205,000As a percentage of GDP, the budget deficit was ________ in year 3.
A. 12.5% B. 2.5% C. 0% D. 15%
A measure of seignorage, in real terms, is ________
A) ? × B) ?B + ?M C) r × D) Y - T - C
Under the second phase of antitrust policy that began in 1914 in the U.S., the courts used _____ in order to judge the firms' actions
a. a rule of reason b. the rule of 72 c. a rule of thirds d. a per se rule e. the rule of law
Money prices are:
A. always the best way to solve economic problems. B. essential to a coordinating mechanism. C. unfair ways of coordinating individual actions. D. not essential to a coordinating mechanism.