EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
expand_more
expand_more
format_list_bulleted
Question
Chapter 1, Problem 4PS
Summary Introduction
To discuss: The effect on the productive capacity of the U.S. economy in the absence of markets to trade financial assets.
Introduction:
Financial trading: Buying and selling financial assets to earn profits is termed as financial trading. Financial instruments such as shares, bonds or derivative securities are traded in financial trading.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Although we stated that real assets constitute the true productive capacity of an economy, it is hard to conceive of a modern economy without well-developed financial markets and security types. How would the productive capacity of the U.S. economy be affected if there were no markets in which to trade financial assets?
Why would the U.S. government consider reinstitutingthe “wall” between investment banking and commercialbanking?
1. A. Identify and explain the functions of financial intermediation.
B. Why does the lack of an efficient and effective system of financial intermediation act as an impediment to the economies in developing countries (comprehensive answer required)?
Knowledge Booster
Similar questions
- An important problem with the gold standard was that a. one country could easily manipulate the system to its advantage and the disadvantage of other countries. b. a country did not have control of its domestic monetary policy. c. exchange rates tended to fluctuate a great deal, making it difficult for businesses to make long-run plans. d. it was too complicated and restricted business activity.arrow_forwardBecause capital flows were an important element in the currency crises, it has been advocated that emerging markets countries avoid the financial instability by restricting capital mobility. Assess the extent to which you agree with this statement.arrow_forward3. Consider the monetary neutrality. Suppose that the central bank changed the money supply. According to economists’ assumption on monetary neutrality, could the change affect the employment in the short-run? How about in the long-run? Short-run: Long-run:arrow_forward
- What is the impact of capital controls that restrict mobility of capital across nationalborders on domestic financial systems and the performance of the economy?arrow_forwardThe main reason that U.S. currency cannot be turned in to the government in exchange for a tangible asset such as gold is that: This gives the government more freedom to manage the nation's money supply U.S. currency is the debt of the Federal Reserve Banks Government officials enjoy acquiring assets and don't want to lose anything tangible People prefer tangible items, so the government would not be able to satisfy demand for the tangible item at any fixed rate of exchange give answer with explanationarrow_forwardFinancial sector plays a crucial role in the accumulation of capital and the production of goods and services. In many developing nations, limited financial markets, instruments, and financial institutions, as well as poorly defined legal systems, may make it costlier to raise capital and may lower the return on savings or investments. They also help to facilitate the international flow of funds between countries. Indian financial market consists of two major segments: (a) Money Market; and (b) Capital Market, While the money market deals in short-term credit , the capital market handles the medium term and long-term credit. The money market is a market for short-term funds, which deals in financial assets whose period of maturity is up to one year. It should be noted that money market does not deal in cash or money as such but simply provides a market for credit instruments such as bills of exchange, promissory notes, commercial paper, treasury bills, etc. These financial…arrow_forward
- Assume that the central bank primay goal is to correct a weak economy. How can it use open market operations to achieve its goal. What is a posible adverse effect of this action buy central bank(even if it achieves its goal)?.arrow_forwardHow foreign currency risk can affect the value of a multinational company?arrow_forwardWhat is the difference between technology risk and operational risk? How does internationalizing the payments system among banks increase operational riskarrow_forward
- Capital and the production of goods and services. In many developing nations, limited financial markets, instruments, and financial institutions, as well as poorly defined legal systems, may make it costlier to raise capital and may lower the retum on savings or investments. They also help to facilitate the intemational flow of funds between countries. Indian financial market consists of two major segments: (a) Money Market; and (b) Capital Market. While the money market deals in short-term credit, the capital market handles the medium term and long-term credit. Q7. (Case Study Problem) Financial sector plays a crucial role in the accumulation of The money market is a market for short-term funds, which deals in financial assets whose period of maturity is up to one year. It should be noted that money market does not deal in cash or money as such but simply provides a market for credit instruments such as bills of exchange, promissory notes, commercial paper, treasury bills, etc. These…arrow_forwardThe ease at which an asset can be converted into a medium of exchange is known as A. Profitability B. Liquidity C. Inflation D. Wealth Economists have documented Pacific island economies in which large rocks and boulders were used as money. While this may work for a group of people who only transact with others on the island, the rocks would not be a useful form of money in the world economy because: A. Large rocks are not easily standardized B. Large rocks are not easily divisible C. Large rocks are not easy to carry D. All of the above are true In the mid 1800's, grain sellers in Chicago would deliver their grain to warehouses and receive a paper receipt that represented their claim on the grain in storage. These receipts became so widely used that grain traders began to use them as money, and they would use the warehouse receipts to settle debts and as collateral to secure short-term loans.…arrow_forwardwhat are the advantages and drawbacks for digital Technology: How It Could Transform the International Monetary System, and what are the suggestions for reducing the risks?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
