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in wholesale credit market, commercial banks only focus on the price rationing strategy. is this true?
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- an example of how the factors in a firm's credit policy might differ between relaxed and restrictive policies, and differ in affecting sales and profit.Why is the Fed’s discount window considered the “lender of last resort” for some banks?What are the four key factors in a firm's credit policy? how would a relaxed policy differ from a restrictive policy? Give examples of how the four factors might differ between the two policies. How would the relaxed versus the restrictive policy affect sales? profits?
- The goal of credit policy is to Maximise sales Minimise bad debt losses Minimise collection expenses Extend credit to the point where marginal profits equal marginal costsWhen a lender refuses to make a loan, although borrowers are willing to pay the stated interest rate or even a higher rate, the bank is said to engage in strategic holding out. collusive behavior. coercive bargaining. credit rationing.In the credit market model with asymmetric information, determine how a consumer will respond to an increase in the fraction of bad borrowers in the population. And discuss how the credit market model with asymmetric information shows how a financial crisis can reduce consumption.
- What is adverse selection? Why does it predict that lenders will prefer to arrange loans through a commercial bank rather than deal directly with a borrower?When a company has a generous credit policy, cash is tied up in receivables and the company must finance its expansion or the payment of its bills through increased borrowing. What label is given to this cost of selling on credit? Carrying cost Sales returns and allowances cost Bookkeeping cost Bad debit costWhich is correct with regards to the effects of restricting credit standards? a. Investment in accounts receivable will likely increase b. An increase in recognition of doubtful accounts expense will probably happen c. Positive impact on the net profit can be noted from decline in the quantity of goods sold d. Quantity of units sold will probably decrease and will result to a lower sales revenue
- What is the difference between a credit sale (with a higher price as compared to the cash sale) and an interest based loan transaction? Explain it with an example.Banks tend to focus their loans in one industry so that they can specialize on that industry and reduce the credit risk of their loan portfolio. Group of answer choices: True FalseShow that the Ricardian Equivalence does not necessarily hold if the assumption of perfect credit markets is violated which means the consumers can be liquidity constrained (e.g. due to transaction cost). More precisely, demonstrate the problem in a situation when the interest rate depends on whether the household lends or borrows in the first period. Lenders get an interest rate is rL, while borrowers face an interest rate rB, with rB > rL. Government can also borrow at the lower interest rate.