Answer:
A) give sellers the incentive to account for the external effects of their actions.
Explanation:
The effect of levying a tax that represents the cost of the externality could lead to one of two outcomes:
- Firms that are causing the externality add the cost of the externality in the final price of their products.
- Firms that are causing the externality attempt to reduce or eliminate the externality, so that prices remain the same, and competitiveness is not lost.
For example, the most common example of an externality is pollution, therefore, the industrial sector operates in a market characterized by negative externalities. If the government levied a tax on factories accounting for the pollution they produce, these factores either would increase prices, or try to reduce pollution.
Answer:
D. Loans are the largest assets and deposits are the largest liabilities
Explanation:
Banks represent financial institutions wherein customers can either save their money or borrow money. Banks ideally serve as an intermediary between borrowers and lenders.
Banks avail funds from the lenders who want to deposit and keep their money safe. Such depositors are paid an interest on the money deposited. Out of the pool of funds created through such deposits, a bank lends these funds to the borrowers who are in need at a rate higher than the rate it provides to it's depositors.
Thus, the money granted as loan to the borrowers by a bank represent it's largest assets, which it will receive in future. While deposits, which the bank has to return to the depositors upon demand, represent a bank's largest liabilities which it must meet.
Typically there is a correlation as time passes, interest rates go up. That is great for investments but not so good for debt.