What is meant by the "paradox of leverage?"
What will be an ideal response?
The paradox of leverage occurs when all financial institutions try to deleverage at once. This will prove counterproductive as falling asset prices will mean more losses, diminishing their net worth still more, raising leverage and making the assets they hold seem riskier, compelling further sales, and so on.
You might also like to view...
In 2008, Cameron began his career with SBC. His starting salary was $32,000. By 2012, his salary increased to $35,000. If the CPI was 100.0 in 2008 and 107.5 in 2012, Cameron's 2012 real income is
A) $35,000. B) $32,558. C) $32,000. D) $37,625. E) $34,400.
Money is not ________
A) income because the former is a stock measure and the latter a flow B) wealth because the former is generally used to procure the latter C) as inefficient as barter because the latter requires a double coincidence of wants D) all of the above E) none of the above