Negative Externalities Exist in the Depository Sector When

question 42

Multiple Choice

Negative externalities exist in the depository sector when

• A)the fear of DI insolvency leads to bank deposit runs.
• B)lending activity is impaired or constrained.
• C)there are delays in disbursements from insolvent DIs.
• D)banks that are healthy suffer when another bank nears insolvency.
• E)All of the above.

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Definitions:

Spare Parts

Components kept on hand for the purpose of replacing failed or worn-out parts in order to maintain the functioning of machinery or equipment.

Equivalent Annual Cost

A financial analysis tool used to compare the cost-effectiveness of two or more investment projects with differing lifespans by calculating the annual cost of each project over its life.

Rate of Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment’s cost.

Equivalent Annual Cost

A financial analysis tool used to compare the cost effectiveness of two or more alternatives with different lifespans expressed on an annual basis.