EBK INVESTMENTS
11th Edition
ISBN: 9781259357480
Author: Bodie
Publisher: MCGRAW HILL BOOK COMPANY
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Question
Chapter 1, Problem 4PS
Summary Introduction
To discuss: The effect on the productive capacity of the U.S. economy in the absence of markets to trade financial assets.
Introduction:
Financial trading: Buying and selling financial assets to earn profits is termed as financial trading. Financial instruments such as shares, bonds or derivative securities are traded in financial trading.
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Students have asked these similar questions
Although we stated that real assets constitute the true productive capacity of an economy, it is hard to conceive of a modern economy without well-developed financial markets and security types. How would the productive capacity of the U.S. economy be affected if there were no markets in which to trade financial assets?
An important problem with the gold standard was that
a. one country could easily manipulate the system to its advantage and the disadvantage of other countries.
b. a country did not have control of its domestic monetary policy.
c. exchange rates tended to fluctuate a great deal, making it difficult for businesses to make long-run plans.
d. it was too complicated and restricted business activity.
Because capital flows were an important element in the currency crises, it has been advocated that emerging markets countries avoid the financial instability by restricting capital mobility. Assess the extent to which you agree with this statement.
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- What is the impact of capital controls that restrict mobility of capital across nationalborders on domestic financial systems and the performance of the economy?arrow_forwardThe main reason that U.S. currency cannot be turned in to the government in exchange for a tangible asset such as gold is that: This gives the government more freedom to manage the nation's money supply U.S. currency is the debt of the Federal Reserve Banks Government officials enjoy acquiring assets and don't want to lose anything tangible People prefer tangible items, so the government would not be able to satisfy demand for the tangible item at any fixed rate of exchange give answer with explanationarrow_forwardWhy would the U.S. government consider reinstitutingthe “wall” between investment banking and commercialbanking?arrow_forward
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