Question

What may be some future trends of the financial system? Explain.

Explain and graphically illustrate the two models of interest rate determination. What factors may cause shifts in the curves in the above models?

Answer 1

answering only the first question as these are separate independet questions.

Some of the future trends of financial system can be as follows:

1) Conservative lending - as the interest rates are about to go up, and regulation post financial crisis keeps tigtening.

2) Increasing Assets Under Management - Since the income and wealth gap is widening, and lesser Americans are garnering bigger share of the wealth pie, we can expect that extra wealth to be parked wit asset managers for generating investment returns.

3) Application of AI in retail banking - Automation is advancing in the retail banking where client solutions are standardised. We can expect the trend to continue.