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- Assume that the government sets a binding
price ceiling on the interest rate that banks charge on loans. Explain carefully the impact of this policy on the financial markets
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- Predict how each of the following economic changes will affect the equilibrium price and quantity in the financial market for home loans. Sketch a demand and supply diagram to support your answers. Because of a threat of war, people become uncertain about their economic future. The overall level of saving in the economy diminishes. The federal government changes its bank regulations in a way that makes it cheaper and easier for banks to make home loans.Predict how each of the following economic changes will affect the equilibrium price and quantity in the financial market for home loans. Sketch a demand and supply diagram to support your answer. People gain confidence that the economy is growing and that their jobs are secure.Predict how each of the following economic changes will affect the equilibrium price and quantity in the financial market for home loans. Which curve will shift: supply or demand? In which direction will the curve shift: right or left? (It may help to use a demand and supply diagram to conduct your analysis.) a. The number of people at the most common ages for home-buying decreases. b. Rents rise extremely rapidly. c. Banks that have made home loans find that a larger number of people than they expected are not repaying those loans. d. Because of a threat of a war, people become uncertain about their economic future.The overall level of saving in the economy diminishes. e. The federal government changes its bank regulations in a way that makes it cheaper and easier for banks to make home loans.
- Predict how possible changes in monetary and/or fiscal policy may impact the supply and demand of the iPhone.Construct a well-labeled diagram of supply and demand in the market for loans that depicts an equilibrium with credit rationing. Be sure to clearly identify the market interest rate, the quantity of loans supplied and the quantity of loans demanded.We would like you to identify a financial market and describe it using an economic approach. What are the goods exchanged? How is the supply set? How is the demand set? What are the constraints that are potentially preventing the market reaching an equilibrium? Examples of financial markets are stock markets, corporate bonds, derivatives, money market, sovereign bonds. We would then like you to reflect on how your new understanding of fundamental economic functions can apply or will apply to your professional experience. Identify a key area where you could apply this new knowledge and explain how it will help you to provide a better analysis of the economics forces at work.
- What are the elements of a firm's credit policy? To what extent can firms set their own credit policies as opposed to having to accept policies that are dictated by "the competition"?Illustrate graphically the effect the credit market crisis in the United States in 2008 had in the market for existing single-family homes. Assuming the demand for existing single-family homes is relatively inelastic, what is likely to happen to the total revenues of home sellers as a result of the credit market crisis?The table below shows the amount of savings and borrowing in a market for loans to purchase homes, measured in millions of dollars, at various interest rates. What is the equilibrium interest rate (blank 1) and quantity (blank 2) in the capital financial market? Now, imagine that because of a shift in the perceptions of foreign investors, the supply curve shifts so that there will be $10 million less supplied at every interest rate. Calculate the new equilibrium interest rate (blank 3) and quantity (blank 4).
- Identify a financial market and describe it using an economic approach. What are the goods exchanged? How is the supply set? How is the demand set? What are the constraints that are potentially preventing the market reaching an equilibrium? Reflect on how your new understanding of fundamental economic functions can apply or will apply to your professional experience. Identify a key area where you could apply this new knowledge and explain how it will help you to provide a better analysis of the economics forces at work.Which of the following was an underlying cause of the economic crisis of 2008? a. The imposition of government regulations on Fannie Mae, Freddie Mac, and other lending institutions that eroded the conventional lending standards in place prior to the mid-1990s b. A failure of government to impose regulations on Fannie Mae, Freddie Mac, and other mortgage lenders c. Federal housing regulations that made it difficult for Fannie Mae, Freddie Mac, and other lending institutions to obtain sufficient loanable funds for the finance housing constructionWhich of the following is NOT typically a role for a financial intermediary...? make public financial statements of borrowers evaluate the riskiness of lending to borrowers pool funds from lenders monitor the financial conditions of borrowers
