Answer: 1. B. The Fed did not want to be viewed as rewarding the poor business decisions of the bank's managers.
2. D. The Fed feared that assisting Lehman Brothers would increase the extent of moral hazard in the financial system.
3. B. The Fed intervened aggressively following the 2008 failure but remained largely inactive for several years following the 1930 failure.
Explanation:
1. In 1930 when the Great Depression was at it's early stages, the Central Bank could have done some things that would have reduced it's impact on the world but they remained passive and did little. One of the reasons was that there was a lack of cohesion between the Fed Districts and some of the directors subscribed to the "liquidationist" which meant that companies that engaged in adverse financial decisions be allowed to fail to as to prune the financial system and make it better. This contributed to the failure to help the Bank of the United States.
2. The Fed did not want to be seen as aiding Moral Hazard when they refused to bail out the Lehman Brothers in 2008. The Lehman Brothers had engaged in very risky transactions that brought it to ruin in 2008 and the Central Bank did not want to encourage the precedent of saving Banks that did so. Moral Hazard is when a risky action is engaged in by a company or person because they will not pay for the risk if things go awry. For example, a person with car insurance might drive more recklessly because they know that if the car crashes, the insurance will cover it. This is what the Fed did not want to encourage. A situation where Banks would engage in risky actions knowing that the Fed would back them up.
3. In the 1930s during the Great Depression, the Fed did not do enough to stem the depression because there was not coordination amongst the districts. They could not agree on a way forward and so did little. They even admitted their failure when in 2002, a member of the Board of Governors called Ben Bernanke said they could have done more.
In 2008 though, the Fed stepped in to help the economy get back on track. They reduced Interest rates and poured money into the economy through various ventures that helped the American public amongst others. Their actions ensured that the 2008 financial crises did not last as long as the Great Depression.
Answer:
Yes
Explanation:
The damages can be recovered as Jerome and Gary hung the playground swing improperly. A child was injured due to their negligent actions. The case will be on Meadowbrook Playground and not on the individual person who has committed the mistake. According to law, the damages can be recovered as the enterprise owned the whole property, and due to their carelessness in the installation of swing, the accident took place. The child's parent has every right to recover damages from the playground owner.
Answer:
They should credit $850 to assets and debit $850 to stockholders' equity (A)
Explanation:
The cash outflow of $850 will reduce the cash position of the company (i.e cash balance under current assets, hence it should be credited) while the stockholders's equity account needs to be debited because the transaction represents a depletion in the value of the company.
Asset account is reduced by crediting while common stock account is reduced by debiting.
Answer:
Open market operations
Fractional reserve banking
Discount rate
Money multiplier
Federal funds rate
Explanation:
Open market operations is the buying and selling of government securities like treasury note by the Fed.
Fractional reserve banking is a system in which banks keep only a percentage of their deposits on reserve as vault cash and deposits at the Fed.
Discount rate is the interest rate the Fed charges on loans of reserves to banks.
Money multiplier is the maximum change in the money supply due to an initial change in the excess reserves banks hold
Federal funds rate is the interest rate banks charge for overnight loans of reserves to other banks.
Answer:
a. Would the accounts receivable account appear in the assets, liabilities, or stockholders' equity section of the December 31, Year 1, balance sheet?
The accounts receivable account would appear in the assets section, and more specifically, in the current assets section. This is because accounts receivable are considered to be an assset.
b. Determine the balance of the accounts receivable account that would appear on the December 31, Year 1, balance sheet.
The Containeres Inc. first earned $25,000 on account, and by the end of the year, it had collected $22,000, thus, the final balance of the accounts receivable is $3,000.
c. Determine the amount of net income that would appear in the Year 1 income statement.
Net Income = Revenue - Expenses
Net Income = $25,00 - $18,000
= $7,000