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ECO 4223 Exam 1 Study Guide With Questions And 100% ALL DETAILED CORRECT ANSWERS
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JACKLINEECO 4223 Exam 1 Study Guide With Questions And 100% ALL DETAILED
n647 CORRECT
ANSWERS
Terms in this set (60)
- markets that channel funds from those who have an excess of available funds to those with a
shortage
Financial Markets - also promote economic efficiency
- channel funds from those without a productive use to those with a productive use but has
shortage of money
What promotes Economic Efficiency? Financial Markets
1. matching of borrowers and lenders
Why do we need Financial Markets? 2. transaction costs --> time, energy, money
3. asymmetric information
- adverse selection
Asymmetric Information
- moral hazard
Adverse Selection ECO 4223 Exam 1 Study Guide
people with the least money & highest risk will want to borrow first
1/8
, 10/4/24, 10:05 AM
change in behavior to act poorly with loan
Moral Hazard
***AIG & collapse of housing market***
American International Group, is an American multinational insurance corporation with
AIG
operations in more than 80 countries and jurisdictions
-stock market
Examples of Financial Markets
-bond market
-represents ownership in a corporation
- *allows corporations to raise money to invest (does not mean stocks or bonds, more so
physical capital)
Stocks
-most widely followed financial market, & is extremely volitile
-also affects the way we feel
- debt security promising to make periodic payments for a specified amount of time
Bond - bond market allows government and corporations to raise money
- the market where interest rates are determined
Who buys bonds? anyone and everyone
Why buy bonds? because excess available funds & no use for it
Who issues bonds? government and corporations, federal and local
Why issue bonds? to raise money to spend on capital
How do you measure the performance of an GDP
economy?
market value of final goods and services produced within the borders of a country during
Gross Domestic Product (GDP)
one year
ECO 4223 Exam 1 Study Guide
2/8
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