If Bankers Have Reason to Feel Optimistic About the Future

question 34

Multiple Choice

If bankers have reason to feel optimistic about the future, they may become very eager to loan money. If insufficient regulations are in place, this could most likely cause what?

• A)Very little change in the short run, as higher interest rates will simply compensate
• B)A credit crunch, which will reduce household consumption and business investment spending, leading to a decline in real output
• C)A higher percentage of loans in default, as riskier borrowers are attracted to easy loans
• D)A credit crunch, as riskier borrowers take out loans

---

Definitions:

Criminal Charges

Legal allegations made by the government claiming an individual or entity has committed a crime.

Elasticity of Demand

A quantification of how price changes influence the amount of a good that is demanded.

Marginal Cost

The supplementary cost involved in creating one more unit of a product or service.

Monopoly

A monopoly is a market structure characterized by a single seller controlling a large portion of the market, lacking significant competition, and often able to influence prices.