In response to an asset-price bubble,macroprudential regulation appears to be the right tool.What is macroprudential regulation?
A) Increasing the federal funds rate across the macroeconomy
B) The use of tax incentives to capture some of the gains from bubbles
C) Regulatory policy to affect what is happening in credit markets in the aggregate
D) None of the above is correct.

Question

Quizplus · Accepted Answer

Macroprudential regulation refers to regulatory policy that aims to address system-wide risks and vulnerabilities in the financial system. It focuses on the aggregate behavior of credit markets rather than the behavior of individual institutions. Therefore, it is an appropriate tool to address asset-price bubbles that may be fueled by excessive credit growth or easy access to credit across the economy. A and B are incorrect as they do not relate to macroprudential regulation.

In Response to an Asset-Price Bubble,macroprudential Regulation Appears to Be