How does trading in over-the-counter markets increase systemic risk?
What will be an ideal response?
By making markets less transparent. OTC transactions are bilateral and largely conducted out of the view of other market participants reducing the transparency of such transactions. The lack of transparency means that traders cannot observe the risks taken by their counterparties and cannot charge an appropriate risk premium for a trader taking a large volume of concentrated risks. If such a large trader were to fail, its counterparties could be seriously impaired, posing a threat to the financial system.
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Which of the following is an example of labor income?
A) Dividend received by shareholder B) Profit earned by an entrepreneur C) Rent paid to a landlord D) Bonus paid to a worker
Suppose that a bank with no excess reserves receives a deposit into a checking account of $10,000 in currency. If the required reserve ratio is 0.20, what is the maximum amount that the bank can lend out?
A) $2,000 B) $8,000 C) $10,000 D) $50,000
The feature of preferences that "more is better"
a. is a logical consequence of transitivity b. is shared by most people, most of the time. c. implies that 5 apples will always be preferred to 4 oranges d. implies that 5 apples will always be preferred to 5 oranges e. means that, when dining, people always try to eat as much as they possibly can
The biggest problem with the ________ was that it was unclear what specific acts were to be considered "restraints of trade."
A. The FTC Act B. The Clayton Act C. The Humphrey-Hawkins Act D. Sherman Antitrust Act