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SOCIOLOGY OF WALL STREET - KEY CONCEPTUAL IDEAS EXAM QUESTIONS AND ANSWERS 100% PASS $13.49
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SOCIOLOGY OF WALL STREET - KEY CONCEPTUAL IDEAS EXAM QUESTIONS AND ANSWERS 100% PASS
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SOCIOLOGY OF WALL STREET - KEY CONCEPTUAL IDEAS EXAM QUESTIONS AND ANSWERS 100% PASS How has financialization contributed to U.S. income inequality? - 1. Greater financialization in industries decreases labor's share of income - Financialization accounts for more than half of the decrease in l...

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  • December 5, 2024
  • 30
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • sociology of wall street key conceptual ideas ex

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  • Wall Street
  • Wall Street

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SOCIOLOGY OF WALL STREET - KEY
CONCEPTUAL IDEAS EXAM QUESTIONS AND
ANSWERS 100% PASS


How has financialization contributed to U.S. income inequality? - ✔✔1. Greater financialization in

industries decreases labor's share of income


- Financialization accounts for more than half of the decrease in labor's share of income since 1970


- Financialization has shifted money away from workers and production and into financial

activities/bankers or traders.


- The decreased investment into production and manufacturing means that fewer resources are available

for non-financial workers and that now, owners and elites have more relative power since workers are

now "disposable" and are excluded from the bargaining process of wages.




2. Financialization increases top executives' share of income


- In part, this is because managers are the ones rewarded for their perceived success in promoting

shareholder value, which increases their bargaining power (since their wages are set by boards of

directors)


- Financial income has decoupled from the production workforce in general so almost all of the profits

run to a select few who manage finance.


- Now that workers are now free agents and


disposable, leads to the end of unions. Unions used



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,to control how many CEO's are paid (CEO's can


only be paid a multiple of the average worker) but


now that there are no unions, CEOs can pay


themselves whatever they want.




3. Financialization increases earnings dispersion among workers


- Differences between the top and bottom get wider, including a greater wage difference between college-

educated and non-college-educated workers


- Institutionally, finance is more culturally valued in the US than ever before, which justifies paying

financial workers much more and means other workers are less valued.


For what purposes are stocks primarily used? (Hint: they're almost never used to raise capital for the

corporation issuing the stock) - ✔✔MYTH: Stocks are used to raise capital for investment


TRUTH:


- a company does not make themselves publicly traded so that it can raise capital for investment.


- instead of getting money from the stock market, it gets it from venture capitalists


- when you buy stock, the money goes to other owners, not to the company itself


- corporations usually get money for investment through credit


- Stocks are speculative investments (investors buy and HOPE price increases) and income stream

(dividend)


- Shareholder value has turned the S.M. into a market for corporate control


- stocks allow founders/owners to transfer ownership (and cash out)


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, Why is there a tradeoff between opportunism and restraint, and how do traders solve this problem? -

✔✔Two main ideas of economics: people are rational and people are self-interested. Tension between

individual self-interest and institutional restraint




Opportunism: when a trader uses his advantage to deceive his trading partner




Inverse relationship: Increase restraint, Decrease opportunism




Trade off between short-term self-interest and long term survival of the market




Opportunism requires a balance between short-term pay off and self-interested behavior and long-term

survival of the market and firm/individual reputation.


For example, cheating your clients can make you a ton of money but can also drive those customers to

other firms. Traders are therefore encouraged to exercise a certain level of restraint within their network

of traders.




Ex: bond traders police each other and find some practices to be acceptable (like submitting traders using

other customer names or showing a bid then withdrawing it before anyone sells to you) but find others

unacceptable (insider trading)


Why did opportunism thrive in the bond market in the 1980s? - ✔✔What enables opportunism in bond

markets:


1) short-term incentives to get money

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Crafted for Academic Insight by KatelynWhitman. All rights reserved © 2025

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