Describe what is meant by economies of scope and explain how financial institutions' realizing economies of scope has led to an increase in conflicts of interest
What will be an ideal response?
Economies of scope is when firms can reduce costs by offering different products or services. For a financial institution, this usually takes the form of taking one information source and using it to provide a different array of services. This may lead to conflicts of interest because these services may have conflicting goals in which employees of different departments may conceal information or disseminate misleading information to financial markets.
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Historical note: The demand-pull inflation during the Vietnam War period (late 1960s, early 1970s)
a. resulted mostly from a fall in aggregate supply brought about by the war b. was precipitated by the rapid oil price increases that made military goods more expensive (fuel for tanks and aircraft) c. was sparked by the rise in taxes needed to finance the war d. was caused in part by the increased demand for military goods e. was fueled by a shift to the left of aggregate demand because people in the armed forces were no longer consumers
Which of the following is not an example of in-kind transfers?
A. Medicaid benefits. B. Housing subsidies. C. Social Security payments. D. Food stamps.