If you invest in an "emerging market fund," your money is probably going to a commercial bank, rather than directly to nonfinancial businesses. Why? Why is that probably a good thing?
What will be an ideal response?
Developing economies are especially dependent on private lending by banks to overcome asymmetric information problems. Few businesses in developing economies can provide information of adequate quantity and quality to issue marketable securities. Banks have a profit incentive to compensate for the rudimentary state of accounting standards, enforcement of property rights, etc. Foreign investors share in the profits of competent bank intermediation.
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Use the following table to answer the next question. The money supply and investment are in billions.Money Supply (billions of dollars)Interest RateInvestment (billions of dollars)$507%$100606110705120804130903140 Assume that the MPC is 0.8 and the reserve requirement is 0.1. If the Federal Reserve needs to increase aggregate demand by $100 billion at each price level to move the economy back to full employment and the current interest rate is 7%, then the Federal Reserve should ________ bonds on the open market equal to ________.
A. sell, $2 billion B. sell, $4 billion C. buy, $4 billion D. buy, $2 billion
Which of the following is generally an opportunity cost of investment in human capital?
a. future job security b. forgone present wages c. increased earning potential d. All of the above are correct.
The Smoot-Hawley trade bill of 1930, designed to save jobs and increase revenue for the federal government, resulted in
A) the protection of jobs while maintaining the level of trade, but it did not increase federal revenues from tariffs. B) a decline in the volume of trade, but an increase in revenue from tariffs, which made it possible for the federal government to balance its budget. C) an increase in both employment and federal revenues from tariffs. D) a sharp reduction in trade and a decline in federal revenues from tariffs.
The term "business cycle" refers to ________.
A) the periodic increases and decreases of the economy B) the periodic purchases of goods and services by the government C) the increases and decreases in the rate of inflation D) the periodic growth of the Federal Reserve system E) the periodic increases and decreases in the GDP due to seasonal factors