22. In an economy, if uncertainty about the health of banks causes depositors to start withdrawing fundsfrom banks, the economy experiences a(n)A) banking crisis.B) restoration of financial condition.C) reduced adverse selection and moral hazard in financial markets.D) increasing information available to investors.23. Agency problems in the subprime mortgage market include all of the following, except:A) homeowners could refinance their houses with larger loans when their homes appreciated in value.B) mortgage originators had little incentives to make sure that the mortgage is a good credit risk.C) underwriters of mortgage-backed securities had weak incentives to make sure that the holders of thesecurities would be paid back.D) the evaluators of securities and the credit rating agencies were subject to conflicts of interest.24. The two main factors that trigger speculative attacks on currencies in developing countries areA) deteriorating banking balances and poor fiscal imbalances.B) deteriorating banking balance sheets and low interest rates abroad.C) low interest rates abroad and poor fiscal imbalance conditions.D) low interest rates abroad and rising asset prices.

Banking crisis: It can be defined as when many people borrow money from the banks but are unable to…

22. In an economy, if uncertainty about the health of banks causes depositors to start withdrawing funds from banks, the economy experiences a(n) A) banking crisis. B) restoration of financial condition. C) reduced adverse selection and moral hazard in financial markets. D) increasing information available to investors.

22. In an economy, if uncertainty about the health of banks causes depositors to start withdrawing funds from banks, the economy experiences a(n) A) banking crisis. B) restoration of financial condition. C) reduced adverse selection and moral hazard in financial markets. D) increasing information available to investors.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter28: Monetary Policy And Bank Regulation

Section: Chapter Questions

Problem 39P: Suppose the Fed conducts an open market sale by selling $10 million in Treasury bonds to Acme Bank....

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