Which of the Following Is One Unintended Consequence of the Federal

question 103

Multiple Choice

Which of the following is one unintended consequence of the federal bailouts in response to the 2008 financial crisis?

• A)Bondholders will charge equity holders for the risk of this abuse.
• B)Equity holders will credibly commit not to take excessive risk by agreeing to very strong bond covenants.
• C)Lenders to corporations considered "too big to fail" may presume they have an implicit government guarantee,thus lowering their incentives to insist on strong covenants.
• D)Managers who earned large bonuses when their businesses did well did not need to repay those bonuses later when things turned sour.

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Definitions:

Complementary Goods

Products or services that are consumed together because the use of one enhances the use or value of the other.

Income Elasticity

A measure of how much the demand for a good or service changes in response to a change in consumers' income.

Cross Elasticity of Demand

A measure of how the quantity demanded of one good responds to a change in price of another good, indicating substitutes or complements.

Digital Cameras

Electronic devices that capture and store photographs in digital format, allowing for immediate viewing, digital storage, and manipulation.