The Contagion Effect Refers to the Fact That

question 43

Multiple Choice

The contagion effect refers to the fact that

• A)deposit insurance has eliminated the problem of bank failures.
• B)bank runs involve only sound banks.
• C)bank runs involve only insolvent banks.
• D)the failure of one bank can hasten the failure of other banks.

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Definitions:

Liability Rules

Legal principles that govern the allocation of costs for damages or harm among parties in civil lawsuits.

Coase Theorem

A principle stating that if trade or bargaining is possible without cost, then the allocation of resources will be efficient and invariant to the allocation of property rights.

Externality

A side effect or consequence of an economic activity that affects other parties without this being reflected in the cost of the goods or services involved.

Compensation

A broad term referring to the combination of salaries, wages, benefits, and other forms of value provided to employees for their services.