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The Dodd-Frank Act, enacted in the United States in the aftermath of the 2007-2009 financial crisis,...

The Dodd-Frank Act, enacted in the United States in the aftermath of the 2007-2009 financial crisis, includes provisions aimed at enhancing the coordination of various regulatory agencies. Which two core principles might best explain these reforms?

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Core Principle 3 - Information is the basis for decisions: Information plays a key role thus must be collected before making decisions. The coordination of the flow of information must be improved among regulatory agencies for better decision making. The collection and processing of information act as a strong foundation of the financial system.

Core Principle 5 - Stability improves welfare: Since stability improves welfare; and improved regulation leads to a greater coordination which bring more stability to the financial system and thus improve welfare. Moreover a stable economy grows faster compared to an unstable economy. Central banks hold powerful tools to steady fragile financial systems and to support or repair or dysfunctional markets. In stabilizing the economy as a whole, they assists in eliminating the risks that individual can’t, thus improving everyone’s welfare in this process.

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