Question

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.

Answer 1

4.Financial markets help to efficiently direct the flow of savings and investments in the economy in ways that facilitate the accumulation of capital and the production of goods and services.The combination of well developed financial markets and intitutions,as well as a diverse array of financial products and instruments,suits the need of borrower and lenders and therefore overall economy.

In other words,financial market are important to the health of the economy because they channel funds from those who do not have a productive use for them to those who do,thereby resulting in higher economic efficiency.

5.When the dollar increases in value,foreign goods become less expensive relative to American goods,thus Americans are more likely to buy forein made jeans than American made jeans.