Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
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Chapter 10, Problem 4E
To determine
Analyze the balance sheets of two financial institutions.
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Macroeconomics (Fourth Edition)
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- Any company in the U.S. that plans to issue stocks or bonds is required by the Securities and Exchange Commission to provide its balance sheet and income statement to the public. Why is this requirement in place? What kind of information that would be useful to potential investors can be found in these financial statements?arrow_forwardProvide an example of an asset market that you think could be an economist's definition of market bubble and explain why?arrow_forwardThe bank wants to sell more shares of stock, keep more of its earnings, buy more Treasury securities, and give fewer business loans. Regulators have always given it a good rating, but this financial institution thinks that by using these strategies, regulators will give it an even better rating. Explain in detail why you think the plans of the financial institution will make both regulators and shareholders happy.arrow_forward
- What has happened to the profitability of financial firms in the US economy in recent decades? Why have they been able to increase their profits? Is this a good thing for the US economy as a whole?arrow_forwardHow is what WallStreetBets did differently from what hedge funds normally do? (GameStop is market manipulation vs. hedge fund billionaires shorting a stock is just an investment strategy.) Did Robinhood’s restrictions punish ordinary people, while large investors and hedge funds were able to trade freely?arrow_forwardExplain why you would be more or less willing to buy long-term Delta Air Lines bonds under the following circumstances: The company just released its financial statements, indicating that income decreased and liabilities increased. You expect a bull market in stocks (stock prices are expected to increase). You have analyzed your country’s monetary policy and expect interest rates to decrease. Brokerage commissions on bonds fall. Your income and wealth increased over the last two years.arrow_forward
- 1) If you are offered the choice of receiving $10,000 today or $10,000 in one year, which option would you choose? Explain using the core principle that you have learned in class. 2) If the U.S. Securities and Exchange Commission eliminated its requirement for public companies to disclose information about their finances, what would you expect to happen to the stock prices for these companies?arrow_forwardWhat is the principal-agent problem as it relates to corporate managers and stockholders? How did firms try to solve this problem in the 1990s? In what way did the “solution” backfire on some firms?arrow_forwardIn chapter 7, "Financial Markets," of the book Naked Economics, the author, Charles Wheelan, states, that, "...all financial instruments - no matter how complex the bells and whistles - are based on four simple needs." Which of the below is NOT of these "simple needs"? Raising Capital. Assumption of risk. Insuring Against Risk.arrow_forward
- Why are financial intermediaries the most heavily regulated businesses in the economy? Explain why stock market is an important factor in business investment decisions? What is inflation? What explains inflation? If there is a recession, will it be more difficult to find a job when you graduate? Explain. What are the six types of regulations the government employs in an attempt to ensure the soundness of our financial intermediaries? Explain. Explain the difference between debt and equity markets. primary and secondary markets, exchange and over the counter markets and money and capital markets. What is the difference between foreign bond and a Eurobond? Which institutions are subject to Federal Deposit Insurance corporation (FDIC) regulations, and what is the nature of the regulations? What are the reasons for high transaction costs to exist in a barter economy? What separates the assets included in M1 from the assets included in M2? Does it matter what definition of money policy…arrow_forwardVisit the Bloomberg Markets website at www.bloomberg .com/markets/stocks. Their interactive graph allows you to see cumulative returns for individual stocks as well as market indices. Over the last five years, which of the three indices appears the most volatile-the S&P 500 (SPX:IND), the Dow Jones Industrial Average (INDU:IND), or the NASDAQ Composite (CCMP:IND)? Which index would have been the best investment if compounded over the last five years?arrow_forwardDescribe in detail the likely information asymmetries that would exist between a tech start up and a venture capital firm interested in investing in the startup. What problems would these asymmetries create and how might they be addressed?arrow_forward
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