Proponents of restricting the size of financial institutions believe this policy will _____, while opponents believe this policy will _____.
A) allow firms to take advantage of economies of scale; increase the volatility of the financial system.
B) reduce the number of financial institutions; give institutions the incentive to take excessive risks.
C) eliminate the need for deposit insurance; encourage imprudent risk taking
D) make the financial system more stable; lead to higher costs

Question

Quizplus · Accepted Answer

Proponents argue that smaller financial institutions would lead to a more stable financial system by reducing the risk posed by "too big to fail" entities. Opponents argue that restrictions could increase operational costs due to the loss of economies of scale and other efficiencies.

Proponents of Restricting the Size of Financial Institutions Believe This