Some Claim That Ratings Agencies Have a Conflict of Interest

question 59

Multiple Choice

Some claim that ratings agencies have a conflict of interest since:

• A)they rate the quality of their own bonds
• B)since agencies charge firms for their services rather than investors, they have an incentive to give high ratings to gain business
• C)government began to include bond ratings as part of regulations of mutual funds, banks, and financial firms
• D)they issued many of the mortgages that were later securitized into bonds

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Definitions:

Crude Quantity Theory

A basic concept in economics that suggests the amount of money in circulation determines the level of economic activity, affecting prices and inflation.

M Rises

An increase in the money supply in an economy, which can affect inflation and interest rates.

Q Falls

Indicates a decrease in the quantity demanded or supplied of a good or service, often in response to changes in price, income, or other factors.

GDP

Gross Domestic Product, the total market value of all final goods and services produced within a country in a given period.