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Question: Systemic risk: Consider the following balance sheets for two hypothetical financial institutions, bank B and bank C:
(a) Fill in the missing entries in the balance sheets (denoted ???).
(b) What is the leverage ratio in each bank?
(c) Suppose housing prices fall sharply and the mortgage-backed securities held by bank C fall in value to only $500. What happens to bank C's net worth?
(d) The shortfall in bank C's equity means that it cannot repay the loan it received from bank B. Assume bank C pays back as much as it can, while still making good on its deposits. What happens to the net worth of bank B?
(e) Discuss briefly how this is related to systemic risk.
With a series of benefit cuts across many firms throughout the economy, some economists argue that nominal wage rates, a major cost of inputs for firms, have been decreasing.
assume that your business is visible and an important member of the community. would the government encourage a
1. which of these economic variables is procyclical and coincident?consumer spending stock pricesthe government bond
Many states have usury laws, which place a ceiling on interest rates. Why do most economists dislike these laws?
Explain in one or two paragraphs why innovation is at the heart of creating and sustaining competitive advantage for firms. You need to mention the interrelationships between innovation and productivity
A competitive firm has the following quadratic cost function: TC = aQ2+ bQ + 100 ,Determine a and b if the following two conditions are satisfied- When the market price is 60, the profit maximizing level of output is 15.
Suppose that the cross-price elasticity of demand between McIntosh and Golden Delicious apples is 0.8, between apples and apple juice is 0.5, between apples and cheese is 0.4, and between apples and beer is 0.1. What can you say about the rel..
Consider the following aggregate consumption and investment function for a closed economy: C = 15 + 0.70Y , I = 30 + 0.1Y - 7.5 rHere, investment is expressed as a function of income Y and interest rate r (expressed as percentage).
Identify a risk situation and discuss an appropriate technique or combination of techniques to manage that risk
You are pension fund manager with a problem. You are constrained by regulation to hold 50% of your pension portfolio in shares, but you are very worried about a stock market crash and would like to hold only riskless bonds. You are not constrained..
q. we observe that the equilibrium price of a cup of coffee sold in cafes rises but the equilibrium quantity i.e. cups
If a poor country invented a brand new product and marketed and exported to other poor countries. What learned theories of international trade does this occurrence contradict
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