One of the Criticisms of Basel 2 Is That It

question 39

Multiple Choice

One of the criticisms of Basel 2 is that it is procyclical. That means that

• A)banks may be required to hold more capital during times when capital is short.
• B)banks may become professional at a cyclical response to economic conditions.
• C)banks may be required to hold less capital during times when capital is short.
• D)banks will not be required to hold capital during an expansion.

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Definitions:

Dynamic Pricing

A pricing tactic that involves constantly updating prices to reflect changes in supply, demand, or market conditions.

Shrinkflation

The process of items shrinking in size or quantity while their prices remain the same or increase.

Volume Maximization

A pricing objective that involves setting prices low to encourage a greater volume of purchases; also called penetration pricing.

Penetration Pricing

A pricing strategy aimed at entering a new market by setting a low price initially to attract customers and gain market share.