Explain the "too big to fail" doctrine
During a financial crisis, some financial institutions may be in danger of failing, The failure of a single institution is a negative event but might not be too damaging to the economy as a whole. However, a very large bank or other financial institution may be linked to other financial institutions to which funds are collected and disbursed. If the larger bank fails initially, there could be a ripple effect in which additional small and large financial institutions fail also. This type of systemic risk makes these large institutions "too big to fail." As such, the government is more likely to regulate them very strictly and the government is also more likely to bail out such institutions in order to prevent a more massive financial crisis.
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Refer to Table 18-6. Sasha is a single taxpayer with an income of $60,000. What is his marginal tax rate and what is his average tax rate?
A) marginal tax rate = 17%; average tax rate = 21% B) marginal tax rate = 23%; average tax rate = 38% C) marginal tax rate = 38%; average tax rate = 23% D) marginal tax rate = 38%; average tax rate = 24%
Federal transfers are expected to grow significantly in the coming decades, due especially to increases in ________
A) federal government consumption B) federal deficits C) Medicare and Medicaid D) Social Security payments