ECON7200
ECONOMICS OF FINANCIAL MARKETS
HOMEWORK ASSIGNMENT
金融市场经济学代写 Use the Turnitin submission link provided. Please submit in a single Word/pdf document. You can either type or write…
Instruction:
- Use the Turnitin submission link provided.
- Please submit in a single Word/pdf document.
- You can either type or write and scan your answer for parts A and B.
- You need to type for part C (essay) as it must be checked for plagiarism.
- If you encounter any problems, please email econ7200@uq.edu.au.
PART A: MULTIPLE CHOICE QUESTIONS 金融市场经济学代写
Each Question is worth 1 mark (15 Marks Total)
- Compared to an economy that uses a medium of exchange, in a barter economy,
A.transaction costs are lower.
B.transaction costs are higher.
C.liquidity costs are lower.
DE.liquidity costs are higher.
2.A financial crisis occurs when an increase in asymmetric information from a disruption in the financial system
A.causes severe adverse selection and moral hazard problems that make financial markets incapable of channeling funds efficiently.
B.allows for a more efficient use of funds.
C.increases economic activity.
D.reduces uncertainty in the economy and increases market efficiency.
3.A bond with default risk will always have a ________ risk premium and an increase in its default risk will ________ the risk premium.
A.positive; raise
B.positive; lower
C.negative; raise
D.negative; lower
4.Moral hazard is an important concern of insurance arrangements because the existence of insurance 金融市场经济学代写
A.is a hindrance to efficient risk taking.
B.causes the private cost of the insured activity to increase.
C.creates an adverse selection problem but no moral hazard problem.
D.provides increased incentives for risk taking.
- Financial markets have the basic function of
A.getting people with funds to lend together with people who want to borrow funds.
B.assuring that the swings in the business cycle are less pronounced.
C.assuring that governments need never resort to printing money.
D.providing a risk-free repository of spending power.
6.The principal-agent problem would not occur if ________ of a firm had complete information about actions of the ________.
A.managers; customers
B.managers; owners
C.owners; managers
D.owners; customers
7.If a $1000 face value coupon bond has a coupon rate of 3.75 percent, then the coupon payment every year is 金融市场经济学代写
A.$37.50.
B.$3.75.
C.$375.00.
D.$13.75
8.The quantity of reserves supplied equals
A.required reserves plus borrowed reserves.
B.total reserves minus required reserves.
C.nonborrowed reserves minus borrowed reserves.
D.nonborrowed reserves plus borrowed reserves.
9.Factors that can cause the supply curve for bonds to shift to the right include
A.an expansion in overall economic activity.
B.a decrease in expected inflation.
C.a decrease in government deficits.
D.a business cycle recession.
10.A substantial decrease in the aggregate price level that reduces firms’ net worth may stall a recovery from a recession. This process is called
A.moral hazard.
B.insolvency.
C.adverse selection.
D.debt deflation.
11.Net worth can perform a similar role to
A.diversification.
B.collateral.
C.intermediation.
D.economies of scale.
12.The present value of an expected future payment ________ as the interest rate increases. 金融市场经济学代写
A.falls
B.rises
C.is constant
D.is unaffected
13. If the amount payable in two years is $2420 for a simple loan at 10 percent interest, the loan amount is
A.$1000.
B.$1210.
C.$2000.
D.$2200.
14.Because of the adverse selection problem
A.good credit risks are more likely to seek loans causing lenders to make a disproportionate amount of loans to good credit risks.
B.lenders may refuse loans to individuals with high net worth, because of their greater proclivity to “skip town.”
C.lenders will write debt contracts that restrict certain activities of borrowers.
D.lenders are reluctant to make loans that are not secured by collateral.
15.The total collection of pieces of property that serve to store value is a person’s
A.income.
B.money.
C.wealth.
D.credit.
PART B: SHORT-ANSWER/CALCULATION QUESTION 金融市场经济学代写
Answer ALL questions. Questions carry marks as indicated. (35 Marks Total)
Show ALL workings. Give your numerical answers to two decimal places.
B1. (15 marks)
Using graphs of the market for reserves, explain and indicate what happens to the cash rate, borrowed reserves, and nonborrowed reserves in the following situations, holding everything else constant. Note that different starting positions of the graph can result in different results; your answer must cover all potential scenarios.
(a) A big bank has just failed, and many commercial banks are expecting a potential bank panic. (5 marks)
(b) The public increases spending as a result of the end-of-financial-year sale, but the RBA wants to keep the cash rate constant. (10 marks)
B2. (8 marks)
Using both the supply and demand for bonds and the liquidity preference framework, show how interest rates are affected when expected inflation increases. Provide labelled graphs to support your answers. Are the results the same in the two frameworks?
B3. (12 marks) 金融市场经济学代写
Suppose that the required reserve ratio is 15%, currency in circulation is $1000 billion, the currency deposit ratio is 0.5, and total reserves are $600 billion.
(a) Calculate the excess reserve ratio, the money supply, and the money multiplier. (6 marks)
(b) Suppose the Central Bank conducts an unusually large open market sale of bonds to commercial banks of $ 200 billion to prick an ongoing housing bubble. Assuming the ratios you calculated in part (a) remain the same, predict the change of the money supply, and the resulting money supply in the market after the sale. (6 marks)
PART C – ESSAY (50 Marks) 金融市场经济学代写
Please TYPE your answer for this part, as it will be checked for plagiarism.
Read the article:
- Yellen, J. L. (2009). A view of the economic crisis and the Federal Reserve’s response. FRBSF
Economic Letter, 2009, 22.
Write an essay (with a proper introduction and conclusion), between 600 and 1000 words, that answers the following tasks:
a.(10 marks) Summarize the article.
b.(10 marks) Explain how the Global Saving Glut could have contributed to the GFC.
c.(20 marks) In your opinion, do you think the Fed’s response during the GFC was appropriate, and if not, what could have been done better?
Writing quality of your essay (including grammar, organization, clarity and references) will also be assessed (10 marks).
