Eco 316 Week 1 Chapter 1 Introducing Money And The Financial System

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This work of ECO 316 Week 1 Chapter 1 Introducing Money and the Financial System consists of: 1.1 Multiple Choices 1) All of the following were events in the financial world in the early 2000s EXCEPT 2) The financial system is primarily a means by which 3) Which of the following is NOT a financial instrument? 4) If you buy a bond issued by Intel, the bond is a(n): 5) Why would a saver with $10,000 be more likely to put it into a bank account than to lend it directly to a borrower? 6) Formerly in Eastern Europe and the Soviet Union, funds were transferred between savers and borrowers primarily through the 7) The experiences of Eastern Europe and the former Soviet Union have demonstrated that 8) Which of the following is NOT a key financial service provided by the financial system? 9) Economists define risk as 10) Economists define liquidity as 11) Which of the following assets is the most liquid? 12) By providing and communicating information, the financial system 13) Which of the following statements is correct? 14) The financial system accounts for about what percentage of the U.S. economy's value added (GDP)? 15) The average pay for jobs is highest in which of the following sectors? 16) The "international capital market" refers to 17) During the past twenty years 18) The bond market is important because 19) Which of the following is NOT a financial intermediary? 20) The main role of financial intermediaries is to 21) A bank lending depositors' money to a local business and a pension fund investing contributions in shares of a company are similar financial activities in that 22) Which of the following is a trend towards globalization that has taken place since the 1980s? 23) Which of the following was an important consequence of the regulatory reforms that followed the deposit insurance crisis of the 1980s and early 1990s? 24) Which of the following rankings of sources of funds for businesses from the least important to the most important is correct? 25) Economists define money as 26) The Federal Reserve System 27) Monetary policy refers to the government's 28) Changes in the money supply are associated with all of the following EXCEPT changes in 29) Which of the following is the primary way that businesses raise funds externally? 30) In the United States, monetary policy is carried out by 31) Economic analysis is useful in 32) The best way to determine if the assumptions of an economic model are appropriate is to 33) To be useful, an economic theory should 1.2 Essays 1) If you had been advising one of the governments in Eastern Europe following the fall of Communism, would you have stressed the importance for economic growth of establishing strong financial markets or the importance of establishing a strong system of financial intermediaries? Explain. 2) When a saver deposits funds in a bank, she may earn about 5% on the deposit. When the bank lends these funds out, it may charge the borrower 9% on the loan. Why don't the saver and the borrower get together directly and avoid the bank? In that situation wouldn't the saver be able to earn more on her funds and the borrower have to pay less to borrow these funds? 3) Why are stories about movements in the money supply prominent in the news media?

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Economics - General Economics Week 1 Should You Invest Short Term? - Week1 DQ1 ECO316 What are the implications of a U.S. policy to “bail out” firms and heavily subsidize the economy? How could such a policy create inflation and higher interest rates? If you have cash available should you wait until interest rates rise? Treasury Inflation Protection Bonds - Week1 DQ2 ECO316 Week 2 New Product, Will I Be Rich? -Week2 DQ1 ECO316 My company just came out with a new product? Should I buy a bunch of company stock and get rich? What are the pros and cons of such an investment? Mutual Fund Regulation - Week2 DQ2 ECO316 From Chapter 12, complete problem 13 (page 276): Describe how mutual funds provide services related to risk sharing and liquidity. Distinguish a mutual fund from a bank. What do the differences you highlighted imply about the need for regulation of mutual funds as opposed to banks? Week 3 Exchange Rate Risk - Week3 DQ1 ECO316 From Chapter 16, complete problem 13 (page 382): Relate the problem of exchange rate risk in international banking to interest rate risk in domestic banking. On the basis of your understanding of interest rate risk, suggest strategies for managing exchange rate risk in international banking. Should I Expect a Bail Out? - Week3 DQ2 ECO316 From Chapter 15, complete problem 19 (page 363): Suppose that you manage a small SL that has a net worth of –$50 million. You fear that within two years, regulators will discover that your firm is insolvent and will shut you down. You have two possible investment strategies: (a) continue to operate as you have been, offering market interest rates on CDs to finance mortgage loans, or (b) offer higher than market interest rates on CDs and use the increased funds to speculate in junk bonds and real estate. Your analysis tells you that strategy (a) has a 10% chance of losing $10 million and a 90% chance of gaining $20 million, with an expected return of $17 million. Strategy (b) has an 80% chance of losing $50 million and a 20% chance of gaining $75 million, with an expected return of –$25 million. What strategy should you follow? Why? What are the consequences of your choice? What should a regulator do in this situation? How might your behavior change if you expect a government bail out? Impacts on Liquidity - Week 3 Assignment - ECO316 From Chapter 18, complete the case on pages 434-435. Your two to three page response should focus on selecting the most relevant factors and organizing them in a coherent fashion. Federal Reserve System and Politics - Week4 DQ1 ECO316 From Chapter 19, complete problem 12 (page 454): Evaluate: The Federal Reserve System is independent of the political process in the United States. Fed Impact on the Dollar - Week4 DQ2 ECO316 From Chapter 21 complete problem 14 (page 501): If the Fed wants to decrease the value of the dollar on foreign-exchange markets, what should it do? What should it do if it wants to increase the foreign-exchange value of the dollar? Week 5 Money Growth Rates and Recessions - Week 5 DQ1 ECO316 From Chapter 26, complete problem 14 (page 632): Suppose that you observed a substantial decline in the money growth rate six months before the start of every recession. Would that be enough to convince you that money affects output? Why or why not? Credit Crunch - Week 5 DQ2 ECO316 From Chapter 27, complete problem 15 (page 653): You have been assigned to determine whether the economy is experiencing a credit crunch. What patterns in movements in the federal funds rate, the volume of bank lending, and the volume of short-term lending in financial markets will you look for? Why? Week 5 - Final Paper - ECO316 Analyze the major problems that countries face in developing a balance between mortgage rates and an expansionary economy. Utilize the Chapter 27 case on pages 654-655, as well as outside resources, as a basis for developing your analysis.

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