How they facilitate reducing risk by either diversification or insurance

How they facilitate reducing risk by either

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How they facilitate- reducing risk by either diversification or insurance, lowering transaction costs, or providing liquidity5.For each of the following transactions, what is the initial effect (increase or decrease) on M1 or M2?a.M2 increasesb.M1 and M2 increasec.M1 increasesd.no effecte.M1 decreases6.There are three types of money - commodity money, commodity backed money, and fiat money. Which type of money is used in each of the following situations?7.Indicate whether each of the following is part of M1, M2, or neither8.If you decide to take the money over a time period of four years, you will be getting $931,944 (value obtained by adjusting for inflation), so it is better to take the 1 million now.9.The drug company Pfizer is considering whether to invest in the development of a new cancer drug. Development will require an initial investment of $10 million now; beginning one year from now, the drug will generate annual profits of $4 million for three years.10.Tracy Williams deposits $500 that was in her sock drawer into a checking account at the local bank.a.Checkable deposits have increased by $500, but there is no initial change in money supply.b.The bank will loan out $450 (90%) and hold $50 (10%) as reservesc.450/.01 = $4,500d.475/.05 = $9,500
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  • Fall '16
  • Ross Graham
  • Macroeconomics, investment spending, local bank

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