Chapter 1: Q.12 (page 66)
Is everybody worse off when interest rates rise?
Bank, lenders and customers with saving deposits do not worse off when interest rate rises.
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In Exercise 1, you collected data on and then graphed the Dow Jones Industrial Average (DJIA). This same site reports forecast values of the DJIA. Go to http://www forecasts.org/data/index.htm, and click on FFC Home at the top of the page. Click on the Dow Jones Industrial link under Forecasts in the far-left column.
a. What is the Dow forecast to be in six months?
b. What percentage increase is forecast for the next six months?
Explain the link between well-performing financial markets and economic growth. Name one channel through which financial markets might affect economic growth and poverty
Name two institutions that are not important financial intermediaries in an economy
How does the current size of the U.S. budget deficit compare to the historical budget deficit or surplus for the time period since 1950?
Can you think of a reason why people in general do not lend money to one another to buy a house or a car? How would your answer explain the existence of banks?
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