We have the following monetary and financial data about a country. (This country uses the same definitions of the terms as the United States). Currency = $2 billion Demand deposits = $3 billion
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- Discuss the role of banks as financial institutions that fuel the economic growth of a nation. Because corporations do not actually raise any funds in secondary markets, they are less important to the economy than primary markets.”E1 Countries that have good financial intermediaries: have savings that are used less effectively. channel fewer savings into funding for investments in capital. have smaller loan markets. make more good investments..Discuss the flow of funds and the flow of financial instruments in the financial system.
- 1. A group of college friends decide to start their own bank, LSU Community Bank, in rural Pennsylvania. In order to get started they put in a total of $10 million of their own money and borrow $40 million from a venture debt lender. (This is known as venture debt lending.) They accept $ 160 million in deposits from households and businesses in the community, and, in turn, make $ 90 million in loans. They also purchase $ 95 million of mortgage-backed securities and keep the remainder of their assets as reserves at the Philadelphia Federal Reserve District Bank. a. Show LSU Community Bank's balance sheet. b. What is LSU Community Bank's reserve-deposit ratio? What is LSU Community Bank's asset to equity ratio? C.Many countries have policies that limit how much interest a moneylender can charge on a loan. Do you think these limits are a good idea? Who benefits from the laws and who loses? What are likely to be the long-term effects of such laws? Tips: For part 2, you may think about how a low interest rate would affect the poor and those who owe huge debts. For part 3, you may think about how it would affect the profitability of the banking sector and the supply of lending (will lenders be encouraged to lend more?), and what implications it may have for "credit rationing" (being credit constrained).Which of the following factors pose a limit on the ability of commercial banks to increase the quantity of money in circulation by extending new loans? Select one or more: a. the quantity of Central Bank reserves that they own b. the quantity of money that savers lent to them by opening deposits c. the behavior of households and firms, which reduce the quantity of money in circulation by repaying previous loans. d. the availability of profitable lending opportunities in the economy e. the willingness of household and firms to take up new debts at the given interest rate
- Explain the concept of “Eurocurrency”. What are its benefits and drawbacks?What is the financial system, Name and describe two markets that are part of the financial system in the U.S. economy. Name and describe two financial intermediaries.If there is a weakening in time preferences among U.S. consumers and foreign entities that channel their wealth to the United States, then we can expect which of the following to increase? Select all that apply. Choose one or more: A. demand for loanable funds B. level of Investment C. supply of loanable funds D. Interest rates
- case 1--------------------Ms. Aqeela is the CEO of a Future Solution Construction Company who engages in financial market since she has a brother who is a well-known financial broker. She is being updated by her brother about the current stock prices, and whose companies are doing good. She has installed in her phone an exchange rate program so she can also monitor the exchange rates of currencies. Some banks are now issuing NCD’s (Negotiable Certificate of Deposits) which are offering good rates. Gold derivative is also being offered in the market. As a CEO, Aqeela enjoys the credit card which becomes usable during her travels abroad. During her travels she learned a lot and discover many things like in Bangladesh she met professional people who belong in a group which benefitted their members and the profit that the organization received were return to members in a form of dividend and patronage refund. In USA she visited one organization that widen her knowledge about fixed…BOP Transactions. Identify the correct BOP account for each of the following transactions. Identify the correct BOP account for each of the following transactions. Specify credit or debit as well.1 Scandinavian Airlines System (SAS) buys jet fuel at Newark Airport for its flight to Copenhagen.2 Hong Kong students pay tuition to the University of California, Berkeley.3 The U.S. Air Force buys food in South Korea to supply its air crews.4 A Japanese auto company pays the salaries of its executives working for its U.S. subsidiaries.5 A U.K. corporation purchases a euro-denominated bond from an Italian MNE.What are the main functions of banks? Explain the role played by commercial banks in the economic development of a country.