Which of the Following Is True of Offshore Banking

question 35

Multiple Choice

Which of the following is true of offshore banking?

• A)The offshore banks are mainly concentrated in the European Union and the transactions are generally denominated in euro.
• B)The offshore banks operate with costly restrictions and pay higher taxes than the domestic banks.
• C)The offshore banks usually charge higher rates of interest on consumption loans than the domestic banks.
• D)Offshore banks in the U.S.are able to offer a higher rate on dollar deposits and a lower rate on dollar loans than their domestic competitors.
• E)Offshore banking transactions are considerably less risky than domestic transactions as they are closely monitored by the government of the nations in which they operate.

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Definitions:

Resource Allocation

The process of distributing available resources among different uses identified in an economy.

Taxing Polluters

A policy approach that imposes taxes on companies or individuals who produce pollution as a means to internalize environmental externalities and encourage pollution reduction.

Positive Externalities

Benefits that affect a third party not directly involved in a transaction or activity, resulting in a positive effect on society.

Principal-Agent Problem

A dilemma in economics where one party (the agent), acting on behalf of another party (the principal), may have different goals or incentives, potentially leading to inefficiencies.