multinational finance current event.docx - I How economic...

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I. How economic machines work 1.What are the 3 main force that drive economy? Productivity growth, short-term debt cycle, long-term debt cycle 2.What role does central government play in economy? Central government collects taxes and spends money. 3.What role does central bank play in economy? Controls the amount of money and credit in the economy by influencing interest rates and printing money. 4.Why is credit so important? It is the biggest and most volatile part of the economy. Credit helps borrowers and lenders get what they want. When borrowers receive credit, they increase their spending which helps stimulate the economy 5.What is the relationship between productivity and credit? Which matters in the short run? Which one matters in the long run? (How does credit drive the cycle?) Increased productivity leads to more income and better credit worthiness, meaning those with higher productivity tend to be easier and more likely to be loaned to.
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