Briefly explain one function of financial instruments that can make them very different from money.
What will be an ideal response?
While financial instruments can function as a means of payment and a store of value, similar to money, one function that can make them very different from money is their ability to transfer risk between buyer and seller. A good example of this is the use of a futures contract that guarantees to the seller of the contract a price well into the future. Another common example is an insurance policy that transfers risk from the insured (a homeowner) to the insurer (the insurance company).
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Answer the next question on the basis of the following consolidated balance sheet of the commercial banking system. Assume that the reserve requirement is 20%. All figures are in billions.Assets (billions of dollars)Liabilities & Net Worth (billions of dollars)Reserves$200Checkable deposits$1000Securities300Stock shares400Loans500 Property400 Suppose the Fed wants to increase the money supply by $1,000 billion to drive down interest rates and stimulate the economy. To accomplish this, it could lower the reserve requirement from 20% to ________.
A. 15% B. 10% C. 14% D. 12%
Unilateral transfers are
A) transactions that take place across national boundaries but in which both transactions are citizens of the same country. B) government transactions that use gold and other official reserves. C) gifts from a resident of one country to a resident in a foreign country. D) the payments of interest to residents of another country.
A copyright
a. is required to sell printed material b. grants exclusive rights over the protected material for at least seventy years c. is granted only to best original works of art, literature, and music d. grants the right to copy certain material such as printed material e. grants communal rights over the protected material for at least seventy years
Recall the Application about the decrease in taxes on cigarettes in several Canadian provinces in 1994 to answer the following question(s). According to this Application, after the government deceased cigarette taxes in several Canadian provinces in 1994, the decrease in the price of cigarettes in these provinces:
A. more than doubled the smoking rate. B. created no noticeable change in the smoking rate. C. increased the smoking rate by roughly 17 percent. D. was accompanied by a slight decrease in the rate of smoking.