How do exchanges seek to reduce default risk in the futures market?
What will be an ideal response?
Exchanges require both the buyer and seller to place an initial deposit in a margin account. At the end of each trading day, exchanges carry out a daily settlement known as marking to market in which, depending on the closing price of the contract, funds are transferred from the buyer's account to the seller's account or vice versa.
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When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline B. increase; raise; decline C. decline; lower; expand D. decline; raise; decline
A market has four individuals, each considering buying a grill for his backyard. Assume that grills come in only one size and model. Abe considers himself a grill-master, and finds a grill a necessity, so he is willing to pay $400 for a grill. Butch is a meat-lover, honing his grilling skills, and is willing to pay $350 for a grill. Collin just met the girl of his dreams, and she loves a good grilled steak, so in his effort to impress her he is willing to pay $320 for a grill. Daniel loves grilled shrimp and thinks it might be cheaper in the long run if he buys a grill instead of eating out every time he wants grilled shrimp, so he is willing to pay $200 for a grill.
If the market price of grills increases from $300 to $325, given the scenario described: A. Collin would drop out of the market. B. Collin's surplus would decrease the most. C. Collin is the only consumer who would be affected in terms of surplus. D. Daniel’s surplus would decrease.
Holding all else constant, an increase in preferences by Mexicans for U.S. goods will ________ the demand for dollars in the foreign exchange market and ________ the equilibrium Mexican peso/U.S. dollar exchange rate.
A. increase; increase B. decrease; decrease C. increase; decrease D. decrease; increase
When the economy goes into a recession and firms require less labor, managers tend to:
A. Reduce wages, to reflect the lower demand for labor B. Avoid cutting wages, for fear of drops in worker-productivity C. Lay off workers, and keep wages of remaining workers constant D. Keep all of their workers, by spreading work more thinly