If the Government Guarantees Liabilities of Financial Institutions Other Than

question 135

Multiple Choice

If the government guarantees liabilities of financial institutions other than deposits:

• A)those financial institutions will have the incentive to engage in overly risky behavior.
• B)those financial institutions will have the incentive to engage in less risky behavior.
• C)the Federal Reserve will be forced to raise reserve requirements.
• D)the economy will be pushed close to the zero bound on interest rates.

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