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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Definitions:

Degrees

A unit of measurement used to determine angles or temperature.

Rack-and-pinion

A type of linear actuator that comprises a circular gear (the pinion) engaging a linear gear (the rack), converting rotary motion into linear motion.

Parallelogram Steering

A steering linkage design in many vehicles where the linkage forms a parallelogram, allowing the wheels to move parallel to each other during turns.

Linkage Components

Various mechanical parts that connect together to transmit motion in order to perform a specific task.