The Average Default Rate in the Economy Is 1

question 22

Multiple Choice

The average default rate in the economy is 1.5% of the face value of outstanding debt defaults per year.What is the average time between defaults if there are 1000 firms alive on average?

• A)20 days
• B)24 days
• C)38 days
• D)41 days

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Definitions:

Economic Efficiency

A state in which resources are allocated in a way that maximizes the production of goods and services at the lowest cost.

Monetary Policy

The management of a country's money supply and interest rates by its central bank, aimed at controlling inflation, stabilizing currency, and achieving economic growth.

Rent-seeking Behavior

Activities aimed at gaining economic benefits through manipulative or exploitative means, without contributing to productivity, typically by influencing government policies or regulations.

Transfer of Wealth

The movement of financial assets or resources from one individual, group, or area to another, often influenced by policies or events.