Two Policies That Are Intended to Make the Financial System

question 34

Multiple Choice

Two policies that are intended to make the financial system more stable by restricting the size of financial institutions are:

• A) to offer cheaper loans to large financial institutions and to make larger capital injections available for larger banks.
• B) to lower the cost of deposit insurance for large banks and to provide incentives for large banks to make speculative investments.
• C) to restrict mergers among large banks and to require higher capital requirements for large banks.
• D) to allow large banks to be more highly leveraged and to increase deposit insurance coverage for depositors at large banks.

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Definitions:

Union Labor

Workforce that is organized in trade unions which negotiate wages, working conditions, and benefits on their behalf.

Production Process

The production process involves the steps, operations, and methodologies utilized to transform raw materials and components into finished goods or services.

Market Conditions

The various factors that influence the supply and demand of goods and services, including prices, competition, and overall economic climate.

Elastic Demand

A situation where the quantity demanded of a product or service changes significantly when its price changes.