Question

4. What is a nonrecourse loan? What is a deficiency payment? How is the deficiency payment calculated? What effect would an acreage reduction program have on deficiency payments? You should be able to support your analysis/conclusions with the appropriate graphs.

Answer 1

Non recourse loan is a secured loan , which is secured by collateral for example real property but borrower is not personally liable to pay if loan is defaulted. lender can only seize the property and sell it but when, property is sells less than debt , he can't compell the borrower to pay balance.

Deficiency payment is a subsidy given by governement to cover a financial deficit incurred in any activity for example farming.

defeciency payment is calculated by the differecne between the govt announced MSP and actual market price of selected item

eliminating the deficiency
payment substantially increases price volatility, producers with high risk
aversion, opportunity cost, or storage cost will instead sell all wheat at
harvest, eliminating all revenue risk.