Identify at least two problems a borrower would face if banks were not required to disclose the information that they are currently required to make available.
What will be an ideal response?
One problem that quickly comes to mind would be all of the hidden fees that a bank could charge for a checking account or a loan application. In addition, the customer would face very high search cost in the sense that they would have to ask a lot of questions of each institution to uncover these hidden costs. Another problem is the way that interest is calculated for savings accounts and loans. For example, is the interest being paid on a savings account based on the average balance or is it based on the balance that exists at the beginning or end of the month? Also, the interest rate charges on the loan, is it expressed as an annual rate or is it calculated using some other formula? The disclosure laws that banks face are designed to reduce these costs to customers and make the comparing of prices across banks easier.
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The market in which the currencies of different countries are exchanged is called the
A) money market. B) capital market. C) foreign exchange market. D) loanable funds market.
Assume that a capital-abundant country trades only two goods with the rest of the world, medical equipment and corn. Medical equipment is relatively capital-intensive. According to the Rybczynski theorem, with the relative price of the goods remaining unchanged, an increase in the country's endowment of capital will cause the output of medical equipment to ________ and the output of corn to
A. fall; rise. B. rise; remain the same. C. rise; fall. D. remain the same; fall.