Implicit Government Support for "Too-Big-To-Fail" Banks

question 117

Multiple Choice

Implicit government support for "too-big-to-fail" banks:

• A) increases the scrutiny of the bank's risk by large corporate depositors.
• B) reduces the risk faced by depositors with accounts less than $250,000.
• C) reduces the risk faced by depositors with accounts exceeding $250,000.
• D) reduces the moral hazard problem of insuring large banks.

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Definitions:

Equilibrium Rate

The price or point at which the quantity of a good or service supplied matches the quantity demanded.

Loanable Funds

The market where savers supply funds for loans to borrowers, often influenced by interest rates.

National Saving

The total amount of savings generated within a country, including both private savings by households and public savings by the government.

Net Capital Outflow

The difference between the purchase of foreign assets by domestic residents and the purchase of domestic assets by foreign residents over a certain period.