Question 6(20) : When discussing regulatory models we talked about the regulatory dialectic. Suppose the regulators are pursuing only the public good in their objectives. The point was made that, in addition to imposing direct costs like reporting, tracking, etc., the regulatory dialectic can impose secondary costs. E.g. a firm, engaging in a legitimate activity, might find its freedom of action limited by the regulations put in place to stop the behaviours of a different firm. Thus the regulations could lead to a loss of value to society as good, valuable, activities are prohibited. Assume this occurs. If so, what are the implications for the optimal level of regulation for the public good? Explain. Question 7(20): If real interest rates start to rise, what impact might that have on bonds? Explain. What impact might that rise in interest rates have on banks? Explain. Would the impact on the bond market also have an impact on banks as well? Explain