In 2008, the Treasury and Federal Reserve took action to save large financial firms such as Bear Stearns and AIG from failing. Which of the following is one reason why these measures were taken?
A) The Fed and the Treasury wanted to allow Freddie Mac and Fannie Mae more time to buy the firms before they went bankrupt.
B) The Emergency Economic Stabilization Act required the Fed and the Treasury to provide financial assistance to firms that participated in regular open market actions with the Fed.
C) The bankruptcy of a large financial firm would force the firm to sell its holdings of securities, which could cause other firms that hold these securities to also fail.
D) The failure of these firms would have forced the Fed to increase interest rates, which could have led to a severe recession.
C
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All of the following are considered a barrier to entry into a market EXCEPT
A) government licenses. B) persistent declining long-run average costs as output increases. C) lowering tariffs. D) governmental regulations of business conduct relating to workplace conditions.
Answer the following statement(s) true (T) or false (F)
1. Economists mostly observe and study what people think, not what they do. 2. Our charitable actions for others are influenced by our assessment of our own benefits and costs. 3. Rational self-interest means that individuals try to weigh the expected marginal benefits and marginal costs of their decisions. 4. Theories and models are more complex versions of the real world used to explain and predict behavior.