Why do futures have lower information costs and higher liquidity than forward contracts?
What will be an ideal response?
The exchange stands as a counterparty to each trade, thus reducing counterparty risk and information costs. The reduced risk and information costs, along with the standardization of contract terms, increase the willingness of investors to buy and sell futures contracts. The large number of buyers and sellers results in increased liquidity.
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If the United States has a $300 billion net capital inflow, then there must be a:
A. trade surplus of $300 billion. B. trade surplus of $600 billion. C. net capital outflow of $300 billion. D. trade deficit of $300 billion.
Firms organize production by using a mixture of two systems: (1 ) command systems and (2 ) incentive systems
Indicate whether the statement is true or false
All of the following are programs that redistribute income by making direct payments to people in the lower part of the income distribution EXCEPT
A) social security programs. B) welfare programs. C) Individual Retirement Accounts. D) unemployment compensation.
In response to the destructive bank panics of the Great Depression, Congress established ________ in 1934 to reduce the likelihood of asset deflation and bank failures
A) the Federal Reserve system B) banking reserve requirements C) fractional reserve banking D) the Federal Deposit Insurance Corporation