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Transcript
College of Business Administration Faisal Ali AL-Ghamdi ID: 200600265 Sec: 102 Assignment: 1 Money and Banking First Semester, Academic Year 2012/2013 Chapter: 1 Q4: The economic behavior depends on if jam a house hold or firm, the falling in interest rate will increase the consumption and decrease saving for the house hold but for the producers the interest yate is cost of loons decreasing interest yate will decrease the borrowing cost and increase investment which increase the total output. I ->decrease ____ INV-> increase ____ AE -> increase ____ y -> increase I = Interest Yate. INV = Investment. AE = Aggregate Expenditures. Y= National Income. Q6: Is everybody worse off when Interest rate rise. The economic efficiency is when some one get better off some one else will be worse off. So not everybody will get worse off because increasing interest rate increase will effects the borrowing cost and the firms and producers will get worse off, but the savers (house hold) will gain more by increasing interest yate and will get better off. _____________________________________________________________________________________________ Q8: The activities in financial markets have direct effect on individual’s wealth by find opportunities for individual to invest their saving money and important for business activities by providing funds for firms to increase their activities and investment and will improve the activities and efficiencies of whole economy. _____________________________________________________________________________________________ Q10: The effect of a fall in stock prices. Stock represents a share of ownership in a corporation. So when the prices of stock falls will affect the size of people’s wealth. When the price of stock decrease and the amount of money owned by shredders will decrease and as a result may affect their willingness to spend and purchasing new stocks. _____________________________________________________________________________________________ Q15: When the dollar is worth more in relation to currencies of other countries. The goods that produced outside US (imported goods) relatively cheaper than the goods that produce by US. And the US companies that manufacture jeans will not be happier because they will loss the competition with the manufacture companies outside US. And the American company that is in the business of important jeans into the US will sale more because relatively cheaper than US product. _____________________________________________________________________________________________ Chapter: 2 Q1: Assets what you owns are called assets and what you owes are called liabilities. So the shares that owned by individuals it’s not owned by Microsoft they issued the shares and sold it to individuals so it’s called liabilities. _____________________________________________________________________________________________ Q2: Today cost is 5000 after one year worth 10,000 so it’s value increase double 100% and if the interest rate is 90% so the repayment will be 9000 after one year. 5000 + 5000 x 0.90 = 9000 So I will be better off I will get a loan and purchased the car. _____________________________________________________________________________________________ Q5: Primary market is a financial market in which new issues of a security. But secondary market is a financial market which securities that have been previously issued can be resold. So it’s less important because it’s not provide funds for the firms to increase their activities but secondary markets also important because it serve two function first they make it easier and quicker to sell there financial instruments to raise cash (more liquid) and increasing liquidity makes them more desirable and thus easier for the issuing firm to sell in the primary market. Second they determine the price of the security that the issuing firm sells in the primary market. _____________________________________________________________________________________________ Q6: I will go to hold bonds issued by the company not equities issued by the company because equities is a part of the company owner. So if the firms will go bankrupt I will loss my investment but if I will buy bonds I will be lender for the company and I will not loss my money if it goes bankrupt. _____________________________________________________________________________________________ Q12: It’s false Financial intermediaries are able to reduce transaction cost and make possible for the savers to provide funds indirectly to people. And allow risk sharing and solve problems created by adverse selection and increasing the efficiency of the economy. But if the information and transaction cost is not exist, will reduce needs for intermediaries. _____________________________________________________________________________________________ Chapter: 3 Q7: Yes, I will give up my checkbook instead using an electronic payment because it’s save the cost of printing the checkbook and needs a little effort and saving time. Unless the cost of transaction is high. Electronic payments that you make all bills payment electronically by websites provided by banks. _____________________________________________________________________________________________ Q8: List from most liquid to least liquid. 1-Currency. 2-Shacking Account Deposit. 3-Saving Deposit. 4-Common Stock. 5-Washing Machines. 6-honses. _____________________________________________________________________________________________ Q10: Increasing inflation especially rapid inflation (continuing high inflation) will affect the value of money decreasing power so the rapid inflation will affect the sealers wealth. To stop this loss the sealers use dollars rather than real’s because it’s more stable and it’s value not decreasing. _____________________________________________________________________________________________ Q13: M1, is the most liquid assets because it’s contains the currency and all other checkable account deposits. M2, is largest measure because it contains (M1) plus saving deposit. _____________________________________________________________________________________________ Q14: M1 is include: 1-Currency. 2-Checkable. M2 include all M1 plus small-denomination time deposits and money market mutual funds. _____________________________________________________________________________________________