Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 28, Problem 33CTQ
The term “moral hazard” describes increases in risky behavior resulting from efforts to make that behavior safer. How does the concept of moral hazard apply to deposit insurance and other bank regulations?
Expert Solution & Answer
Trending nowThis is a popular solution!
Students have asked these similar questions
write 300 words about the term “moral hazard” describes increases in risky behavior resulting from efforts to make that behavior safer. How does the concept of moral hazard apply to deposit insurance and other bank regulations?
Increases in risky conduct as a result of efforts to make that behavior safer are referred to as "moral
hazards." How do deposit insurance policies and other banking rules relate to the idea of moral hazard?
What does the term "bank failure" mean? What role does FDIC insurance play?
How many banks failures occurred in the United States during the most recent complete calendar year?
Chapter 28 Solutions
Principles of Economics 2e
Ch. 28 - Why is it important for the members of the Board...Ch. 28 - Given the danger of bank runs, why do banks not...Ch. 28 - Bank runs are often described as self-fulfilling...Ch. 28 - If the central bank sells 500 in bonds to a bank...Ch. 28 - What would be the effect of increasing the banks...Ch. 28 - Why does contractionary monetary policy cause...Ch. 28 - Why does expansionary monetary policy causes...Ch. 28 - Why might banks want to hold excess reserves in...Ch. 28 - Why might the velocity of money change...Ch. 28 - How is a central bank different from a typical...
Ch. 28 - List the three traditional tools that a central...Ch. 28 - How is bank regulation linked to the conduct of...Ch. 28 - What is a bank run?Ch. 28 - In a program of deposit insurance as it is...Ch. 28 - In government programs of bank supervision, what...Ch. 28 - What is the lender of last resort?Ch. 28 - Name and briefly describe the responsibilities of...Ch. 28 - Explain how to use an open market operation to...Ch. 28 - Explain how to use the reserve requirement to...Ch. 28 - Explain how to use the discount rate to expand the...Ch. 28 - How do the expansionary and contractionary...Ch. 28 - How do tight and loose monetary policy affect...Ch. 28 - How do expansionary, tight, contractionary, and...Ch. 28 - Which kind of monetary policy would you expect in...Ch. 28 - Explain how to use quantitative easing to...Ch. 28 - Which kind of monetary policy would you expect in...Ch. 28 - How might each of the following factors complicate...Ch. 28 - Define the velocity of the moneyCh. 28 - What is the basic quantity equation of money?Ch. 28 - How does a monetary policy of inflation target...Ch. 28 - Why do presidents typically reappoint Chairs of...Ch. 28 - In what ways might monetary policy be superior to...Ch. 28 - The term moral hazard describes increases in risky...Ch. 28 - Explain what would happen if banks were notified...Ch. 28 - A well-known economic model called the Phillips...Ch. 28 - How does rule-based monetary policy differ from...Ch. 28 - Is it preferable for central banks to primarily...Ch. 28 - Suppose the Fed conducts an open market purchase...Ch. 28 - Suppose the Fed conducts an open market sale by...Ch. 28 - All other things being equal, by how much will...Ch. 28 - Suppose now that economists expect the velocity of...Ch. 28 - If GDP is 1,500 and the money supply is 400, what...Ch. 28 - If GDP now rises to 1,600, but the money supply...Ch. 28 - If GDP now falls back to 1,500 and the money...
Additional Business Textbook Solutions
Find more solutions based on key concepts
What is the relationship between management by exception and variance analysis?
Horngren's Cost Accounting: A Managerial Emphasis (16th Edition)
List and describe at least three barriers to effective decision-making.
Principles of Management
E2-13 Identifying increases and decreases in accounts and normal balances
Learning Objective 2
Insert the mis...
Horngren's Accounting (11th Edition)
When sales price increases and all other variables are held constant, the break-even point will A. remain uncha...
Principles of Accounting Volume 2
Determine the annual budget for office utilities using the data from the past 12 months shown in Figure 9-7. Ut...
Construction Accounting And Financial Management (4th Edition)
Define cost object and give three examples.
Cost Accounting (15th Edition)
Knowledge Booster
Similar questions
- Excess reserves are insurance from deposit outflow. Suppose you hold 15 million required reserves and 45 million excess reserves at the central bank. The total interest payment on reserves from the central bank is 0.3%. If you do not hold your excess reserves at the bank, you may take loans and earn 4% in average. What is the cost of holding excess reserve at the central bank?arrow_forwardHow does federal deposit insurance encourage greater risk taking by banks? Could the banking system function without government deposit insurance? How?arrow_forwardWhich banks can choose not to be insured by the FDIC? Banks that are members of the Fed State-chartered banks Credit unionsarrow_forward
- Why has the number of bank holding companies dramatically increased?arrow_forwardWhich government agency is responsible for handling bank failure? Describe the methods that the government uses to intervene in the case of a bank failure. If you were a major depositor with about $400,000 of deposits at a failed bank, which method would prefer for the government to use? Explain whyarrow_forwardCan the banks make easy profits because the money multiplies? How? Is it fair and efficient? Is the basic structure of banking stable and fair? Could it be different?arrow_forward
- The banking system of Canada is based on a fractional reserve system. What dangers does this type of arrangement pose for the safety of the banking system? Also, bankers have a reputation for conservatism in politics, dress, and business affairs. Is there an economic rationale for this conservatism? Explain.arrow_forwardWhat effect has the presence of federal deposit insurance had on the banking industry? Banks have made riskier loans. Banks have made it more difficult for customers to qualify for loans. Banks now hold more excess reserves. Depositors have become more vigilant in monitoring the decisions made by managers of their banks.arrow_forwardA financial depository institution's reserve requirement is a specified percentage of: Group of answer choices deposits that must be kept as actual reserves. regulated reserves provided by the federal government. required reserves that must be kept as part of actual reserves. actual reserves kept at the federal reserve. excess reserves that must be backed as required reserves.arrow_forward
- What is the risk if a bank does not diversify its loans?arrow_forwardWhich of the following institutions oversees the safety and stability of the U.S. banking system? a. Office of the Comptroller of the Currency b. Federal Financial Institutions Examination Council c. Federal Open Market Committee d. The Federal Reservearrow_forwardBanks are financial intermediaries engaged in maturity transformation. Explain what it means for banks to engage in maturity transformation and what are the risks associated with it for banks and depositors. How do banks make profits?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
- Macroeconomics: Private and Public Choice (MindTa...EconomicsISBN:9781305506756Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage LearningEconomics: Private and Public Choice (MindTap Cou...EconomicsISBN:9781305506725Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. MacphersonPublisher:Cengage LearningEconomics Today and Tomorrow, Student EditionEconomicsISBN:9780078747663Author:McGraw-HillPublisher:Glencoe/McGraw-Hill School Pub Co
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Macroeconomics: Private and Public Choice (MindTa...
Economics
ISBN:9781305506756
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Economics: Private and Public Choice (MindTap Cou...
Economics
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:Cengage Learning
Economics Today and Tomorrow, Student Edition
Economics
ISBN:9780078747663
Author:McGraw-Hill
Publisher:Glencoe/McGraw-Hill School Pub Co