Banks Engage in Regulatory Arbitrage by

question 44

Multiple Choice

Banks engage in regulatory arbitrage by

• A)keeping high-risk assets on their books while removing low-risk assets with the same capital requirement.
• B)keeping low-risk assets on their books while removing high-risk assets with the same capital requirement.
• C)hiding risky assets from regulators.
• D)buying risky assets from arbitragers.

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Definitions:

Price-elastic

Describes a situation where the demand for a product is sensitive to price changes.

Home Entertainment System

An array of electronic devices set up in a home to reproduce the experience of watching movies or listening to music in a theater-like setting.

Quaker State Oil

A brand known for producing motor oil and other automotive lubricants and products, with a long history in the United States.

Price-elastic

A product or service is considered price-elastic when its demand significantly changes in response to a change in its price; high elasticity indicates significant changes in demand.