In a Vicious Cycle of Deleveraging

question 41

Multiple Choice

In a vicious cycle of deleveraging:

• A)banks buy some type of asset and push the price up to an unreasonable level.
• B)banks are forced to sell assets at a deep discount to reduce their debt.
• C)depository banks and shadow banks engage in maturity transformation.
• D)the Fed is prohibited from acting as a lender of last resort.

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Definitions:

Fixed Costs

Costs that do not vary with the volume of output, such as rent, salaries, and insurance.

Target Net Profit

The desired bottom-line profit that a company aims for after all expenses have been subtracted from revenue.

Safety Margin

The difference between your actual or projected sales and the sales level needed to break even.

Tax Rate

The percentage at which an individual or corporation is taxed by the government, which can vary based on income level, type of income, or legal entity type.