have the basic function of A A) getting people with funds to lend together with people who want to borrow funds. B) assuring that the swings in the business cycle are less pronounced. C) assuring that governments need never resort to printing money. D) providing a risk-free repository of spending power. 2) Financial markets improve economic welfare because B A) they channel funds from investors to savers. B) they allow consumers to time their purchase better. C) they weed out inefficient
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personal decisions as whether to consume or save‚ whether to buy a house and whether to purchase bonds or put funds into a savings account. Interest rates also affect the economic decisions of households or businesses such as whether to put their money in the bank or invest in new equipments for factories. Before continuing‚ we must understand exactly what interest rates mean. By holding financial instruments ‚ such as loans or bonds. Savers and financial institutions extend credits to those
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a faith good payment made by a buyer to underline his or her commitment to complete the deal. In mortgage agreements‚ down payment is the difference between the purchase price of a property and the mortgage loan amount. Also called earnest money or front money. In addition it is known as a type of payment made in cash during the onset of the purchase of an expensive good or service. The payment typically represents only a percentage of the full purchase price; in some cases‚ it is not refundable
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UCLA-SPR14-PRACTICE QUESTIONS-MIDTERM I 1. Financial markets contain people and firms that buy and sell two kinds of assets: ________ and ________. A) travelers checks; insurance policies B) currency; securities C) dollars; euros D) bonds; stocks 2. Which of the following best defines a security? A) It is a claim on the past flow of income. B) It is a claim on the depreciation of income. C) It is a fixed payment. D) It is a claim on the future flow of income. 3. A bond is an example
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1. How can the adverse selection problem explain why you are more likely to make a loan to a family member than to a stranger? Because you know your family member better than a stranger‚ you know more about the borrower’s honesty‚ propensity for risk taking‚ and other traits. There is less asymmetric information than with a stranger and less likelihood of an adverse selection problem‚ with the result that you are more likely to lend to the family member. 2. If mortgage rates rise from 5%
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SOLUTIONS 1 Multiple Choice Questions (20 percent) 2 percent for each question 1. Liquidity... is the ease with which an asset can be exchanged for money 2. The concept of adverse selection helps to explain... why the financial system is heavily regulated 3. The Fed can influence the fed fund interest rate by selling T-bills‚ which ____reserves‚ thereby ____the federal fund rate. removes‚ raising 4. Standard Repos... are very low risk loans 5. A 4-year bond pays an annual coupon of 3.5%. If the
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increase in the money supply not supported by the Gross domestic product growth. This causes an imbalance in the supply and demand for money. When there is an extreme rapid growth in the supply of paper money‚ this result because of monetary and fiscal authorities of a nation issue large amounts to pay for government costs. In the event of hyperinflation the growth in the output of goods and services is exceed the money printed out. The citizens of that country lose total confidence in the money because
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the goods being sold it also affects the people buying them. With deflation comes layoffs and pay cuts which in turn affects the consumers. To top it all off with deflating prices don’t change debts so if prices and wages start falling it means less money for consumers‚ but your debts would not change as a result. Throughout this essay I will go into more depth about why deflation is a bad thing and give some real life examples of what it can do to an economy. One thing that many people do not understand
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3215 REV: JUNE 21‚ 2010 WILLIAM J. BRUNS Lyons Document Storage Corporation: Bond Accounting In December 2008 Rene Cook sat in her cubicle trying to remember what she had learned in business school about bonds and bond accounting. Ms. Cook‚ a new MBA and special assistant in a training assignment with the company president‚ had just met with David Lyons‚ president of Lyons Document Storage Corporation. He had asked her to think about the possible consequences of repurchasing company
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States in a year. 2. Real GDP – The dollar amount of money made by businesses‚ government‚ and households combined. 3. Nominal GDP – GDP without taking in account other factors like inflation. It estimates current GDP so analyst can try to determine if GDP will go up or down next. 4. Unemployment Rate – Rate of home many people have applied for unemployment. If this rate goes up‚ GDP will go down because citizens will not have any money to spen to buy goods or services to add to the value
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