4. A cash-starved town decides to impose a the quantity demanded and the quantit

Question

4. A cash-starved town decides to impose a the quantity demanded and the quantity supplied at varu 6 excise tax on T-shirts sold. The following table shows tax Price per T-shirt $19 $16 $13 $10 $7 $4 Quantity demanded Quantity supplied 0 10 20 30 40 50 60 50 40 30 20 10 tre the equilibriu m quantity demanded and the quantity supplied before the tax is implemented? Determine the consumer an producer surplus before the tax. the quantity supplied after the tax is at are the equilibri implement um quantity demanded and ed? Determine the consumer and producer surplus after the tax. How much tax revenue does the town generate from the tax? C.

Explanation / Answer

The second major argument against a large involvement of central banks in supervision is the alleged conflict of interest between monetary policy and prudential supervision. Many authors have argued that the institution in charge of monetary policy cannot be entrusted with supervision, because the monetary policy stance would be "contaminated" by supervisory issues, for instance the need to safeguard the liquidity of individual banks.

The advent of the euro, however, has shifted the balance of arguments decisively in favour of a large involvement of national central banks (NCBs) in supervision, for two main reasons. First, the argument of a conflict of interest between monetary policy and prudential supervision becomes irrelevant within the euro area, where supervisory responsibilities are at the national level. Since the geographical jurisdictions of monetary policy and prudential supervision no longer coincide, NCBs in charge of prudential supervision are shielded from the traditional conflict of interest.

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