As Compared to a Default on the Notional Principle,a Default

question 106

Multiple Choice

As compared to a default on the notional principle,a default on a swap

• A) is more costly.
• B) is about as costly.
• C) is less costly.
• D) may cost more or less than default on the notional principle.

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Definitions:

Foreign Purchases Effect

The decrease in domestic demand for goods and services as a result of consumers buying goods from foreign markets, usually due to price or currency exchange advantages.

Interest Rate Effect

The interest rate effect describes how changes in the central bank's interest rate influence the economy by affecting consumer spending and investment.

Entropy Effect

In thermodynamics, it refers to the measure of disorder or randomness in a system; metaphorically used in various fields to describe chaos or decline.

Classical Economists

Economists from the 18th and 19th centuries who believed in free markets, limited government intervention, and self-regulating economies.