Author Question: The Paradox of Financial Innovation states that: a. What once was thought of as a financial ... (Read 43 times)

Zoey63294 · **on:** Jun 30, 2018

The Paradox of Financial Innovation states that:
a. What once was thought of as a financial innovation is really just old wine in a new bottle (i.e., nothing new).
b.When a single firm, in isolation, tries to de-lever its balance sheet, the net effect is often for its leverage to rise.
c. Financial innovation is a puzzle (i.e., a paradox) and always will be.
d. When a large portion of the market tries to de-lever its balance sheet, asset prices fall, thereby causing leverage to increase (not decrease).
e. If not fully understood by users and regulators, financial instruments that were created to reduce risk can end up increasing them.

Question 2

The automatic stabilizers are:
a. Powerful engines that can move nations closer to full employment and price stability.
b. Most beneficial to nations that are far away from their ideal economic position.
c. Most beneficial to nations that are close to the ideal economic position.
d. Very beneficial to nations regardless of whether they are far above or far below full employment.