Question

The government announces that it will bail out all big banks in the next recession. As a consequence, we can expect?

1) More mergers in the banking sector
2) More risky lending
3) Higher taxes
4) All of the above

Answer 1

When the government bails out big banks in a recession, we can expect more mergers, more risky lending, and higher taxes.

Step-by-step explanation:

When the government announces that it will bail out all big banks in the next recession, several consequences can be expected.

1. More mergers in the banking sector: The bailouts provide financial support to struggling banks, making them attractive targets for acquisition by stronger banks.
2. More risky lending: Knowing that the government will bail them out, banks may engage in riskier lending practices, leading to potential instability in the financial system.
3. Higher taxes: The government needs to fund the bailouts, which can result in increased taxes for individuals and businesses.

Therefore, the correct answer is All of the above.