Bankers have a reputation for conservatism in politics, dress, and business affairs. Is there an economic rationale for this conservatism? Explain
There is an economic rationale for this conservatism. Checking deposits are pure fiat money. These deposits are backed by nothing more than a particular bank's promise to convert them into currency on demand. If people lose trust in a bank, then it will lead to the danger of a run. The danger of a run on the bank has induced bankers to keep prudent norms and to lend out money carefully. They achieved the prudence through two principal ways. First, they maintained a sufficiently generous level of reserves to minimize their vulnerability to runs. Second, they were cautious in making loans and investments, because any large losses on their loans would undermine their depositors' confidence.
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When trying to determine the standard of living in a given country, it is not important to observe its income distribution, because what we are interested in is the income per person in the economy
a. True b. False Indicate whether the statement is true or false
Economists generally recognize that rent controls cause shortages in housing, yet rent controls tend to persist. Why does this occur?
a. Many people do not understand the effects that controls cause. b. Property owners are politically unpopular. c. Many persons tend to benefit from rent controls. d. All of the above are correct.