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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

Something is referred to as a “double-edged sword” if it can have both favorable and unfavorable consequences. In what way might government bailouts of failing companies or financial institutions be a double-edged sword? Explain your answer.

To determine

Explain how the bailouts are referred to “double-edged sword”.

Explanation

Providing financial assistance from the government to a failing business or economy to save it from collapse is called bailouts. Provision of bailouts have a double-edged sword character. The double-edged sword means both favorable and unfavorable consequences by doing something.

The favorable consequence generated by providing bailouts is that it encourages the companies to carryon business with full confidence because they know that support from the government ...

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