The Economics of Money, Banking, and Financial Markets Essay Example

The Economics of Money, Banking, and Financial Markets Essay Example The Economics of Money, Banking, and Financial Markets Essay The Economics of Money, Banking, and Financial Markets Essay 1. What is the typical relationship between involvement rates on three-month Treasury measures. long-run exchequer bonds. and Baa corporate bonds? The involvement rate on three-month Treasury measures fluctuates more than the other involvement rates and is lower on norm. The involvement rate on Baa corporate bonds is higher on norm than the other involvement rates. 2. What consequence might a autumn in stock monetary values have on concern investing? The lower monetary value for a firm’s portions means that it can raise a smaller sum of financess. and so investing in works and equipment will fall. 3. What consequence might a rise in stock monetary values have on consumers’ determinations to pass? Higher stock monetary values mean that consumers’ wealth is higher and so they will be more likely to increase their disbursement. 4. Why are fiscal markets of import to the wellness of the economic system? Because they channel financess from those who do non hold a productive usage for them to those who do. thereby ensuing in higher economic efficiency. 5. What was the chief cause of the recession that began in 2007? The chief cause of the recession that began in 2007 was the defaults in subprime residential mortgages led to major losingss. 6. What is the basic activity of Bankss? Banks accept sedimentations and so utilize the ensuing financess to do loans. 7. What are other of import fiscal mediators in the economic system besides Bankss? Savingss and loan associations. common savings Bankss. recognition brotherhoods. insurance companies. common financess. pension financess. and finance companies 8. Can you believe of any fiscal invention in the past 10 old ages that has affected you personally? Has it made you better or worse off? In what manner? 9. Have the rising prices rate in the U. S. increased or decreased in the past few old ages? What about the involvement rates? The rising prices rate in the U. S. increased in the past few old ages and the involvement rates decreased. 10. If the history repeats itself and we see a diminution in the rate of money growing. what might you anticipate to go on to a. existent end product? will increase b. the rising prices rate? will diminish c. involvement rates? will diminish 11. When involvement rates decrease. how might concerns and consumers change their economic behaviour? Businesss would increase investing disbursement because the cost of funding this disbursement is now lower. and consumers would be more likely to buy a house or a auto because the cost of financing their purchase is lower. 12. Is everybody worse off when involvement rates rise? No. Peoples who borrow to buy a house or a auto are worse off because it costs them more to finance their purchase ; nevertheless. rescuers benefit because they can gain higher involvement rates on their nest eggs. 13. Why do directors of fiscal establishments care so much about the activities of the Federal Reserve System? Because the actions of the Federal Reserve affects involvement rates. rising prices. and concern rhythms. all of which have an of import impact on the profitableness of fiscal establishments. 15. How does a diminution in the value of lb sterling affect British consumers? It makes foreign goods more expensive and so British consumers will purchase less foreign goods and more domestic goods. 16. How does an addition in the value of the lb sterling affect American concerns? It makes British goods more expensive relation to American goods. American concerns will happen it easier to sell their goods in the United States and abroad. and the demand for their merchandises will lift. If. nevertheless. an American concern depends on supplies/parts from British companies these merchandises will increase their costs. 17. How can alter in foreign exchange rates affect the profitableness of fiscal establishments? Changes in foreign exchange rates change the value of assets held by fiscal establishments and therefore take to additions and losingss on these assets. Besides changes in foreign exchange rates affect the net incomes made by bargainers in foreign exchange who work for fiscal establishments. 18. Harmonizing to Figure 8. in which old ages would you hold chosen to see the Grand Canyon in Arizona instead than the Tower of London? Where the dollar was weak 1991. 1993. 1995 etc. the Grand Canyon 19. When the dollar is worth more in relation to currencies of other states. are you more likely to purchase American-made or foreign-made denims? When the dollar additions in value. foreign goods become less expensive relation to American goods ; therefore you are more likely to purchase French-made denims than American-made denims. The ensuing bead in demand for American-made denims because of the strong dollar injuries American denims makers. On the other manus. the American company that imports denims into the United States now finds that the demand for its merchandise has risen. so it is better off when the dollar is strong. 20. Much of the U. S. authorities debt is held as exchequer bonds and measures by foreign investors. How do fluctuations in the dollar exchange rate affect the value of that debt held by aliens? Foreign holders of this debt are concerned that the U. S. will allow the dollar value diminution so the comparative value of its debt is less. As the dollar loses value. investors are less likely to keep assets in dollars as they wait for the diminution to halt.