Which of the following is not a major role of financial institutions?
a) It seeks to minimize interest rates that it pays to savers.
b) It seeks to diversify assets to reduce risk.
c) It seeks to minimize transaction costs.
d) It seeks to minimize information costs.
Ans: a) It seeks to minimize interest rates that it pays to savers.
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Economists use the term "ceteris paribus" to indicate that: a. the analysis is true for the individual but not for the economy as a whole
b. supply and demand are in balance. c. their conclusions are based on normative rather than positive economic analysis. d. other things are assumed to remain constant.
If the U.S. dollar buys 50 Japanese yen, and 50 yen buy 75 Russian rubles, and 75 rubles buy 300 Israeli shekels, and the exchange rate of the dollar for the shekel is below 300,
a. there is an arbitrage opportunity b. the demand for all currencies (yen, ruble, shekel, dollar) will increase c. the market is in equilibrium d. the supply of all currencies (yen, ruble, shekel, dollar) will increase e. there is no possibility for arbitrage
Tatiana observes that all of her friends who have more than five tattoos also have more than five body piercings, and concludes that getting multiple tattoos makes people also get multiple piercings. Tatiana is
A. confusing correlation and causation. B. describing regression discontinuity. C. correct in her analysis. D. describing difference-in-differences.
To contract the money supply, the Fed should
A. increase government spending and cut taxes. B. lower the required reserve ratio. C. sell U.S. government securities. D. reduce the differential between the discount rate and the federal funds rate.