EBK THE ECONOMICS OF MONEY, BANKING AND
EBK THE ECONOMICS OF MONEY, BANKING AND
4th Edition
ISBN: 9780100668201
Author: Mishkin
Publisher: YUZU
Question
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Chapter 10, Problem 1DAP
To determine

The changes in the proportion of large and small sized banks and the too-big-to-fail problem and moral hazard on the changes in the proportion of banks.

Concept Introduction:

Too-Big-To-Fail-Problem:

In the financial sector, the entire set of organization is interconnected to one another. Thereby, if the disaster occurs in any one of the firms, it could hamper the production of the other organizations in the industry. This would affect the economic system of the country.

Moral Hazard:

Lack of incentive to guard against risk where one is protected from its consequences, e.g. by insurance.

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