Question

Q2: Some economists suspect that one of the reasons that economies in developing countries grow so slowly is that they do not have well-developed financial markets. Does this argument make sense?

Q3. When interest rates fall, how might you change your economic behavior?

Q4: Why are financial markets important to the health of the economy?

Q5: When the American dollar worth more in relation to currencies of other countries, would an American be more likely to buy American-made or foreign-made jeans?

Q6. Why do Government Treasury bills have lower interest rate than large-denomination negotiable bank CDs?

Q7. Interest rates are among the most important monetary variable watched in the economy. Briefly explain why interest rate is important for the economy.

Q8. Briefly explain the meaning of the following terms:
a) Fiat Money
b) Liquidity
c) FinTech
d) Treasury Bills
e) Commercial Paper
f) Bitcoins
g) Yield Curve
h) Money Market
i) M1 and M2
j) Junk Bonds

Answer 1

2.This arguments make sense.

Financial  markets are necessary for promoting economic efficiency because they allow funds to be transferred from a person who has no investment opportunities to one who has them.Absence of financial markets means that fund cannot be moved to people who have the most productive use for them.Enterpreneurs then cannot acquire funds to set up business that would help the economy grow rapidly.

3.When interest rate fall,people make more investment as cost of borrowing fall and it lead to economic boom.

When interest rate fall,people will be less likely to put their money in the bank in the form of fixed deposit and savings,they will be more inclined to invest their money in equities.