Problem Set 1 Solutions
12. Rank the following assets in terms of their liquidity, from least to most liquid:
cash, savings deposits, gold, a house, a rare oil painting, a checkable deposit.
Explain your rank order.
1A rare oil paintin
Employment Act of 1946 and Humphrey Hawkins Act- congress enacted to promote high employment and price stability. Requires fed to explain how actions/ procedure are consistent with the presidents
economic objective. Chairman has to testify before congress
Economic and Financial Analysis of an Ever-Changing System
Economics is the study of how a society decided what gets produced, how it gets produced, and
who gets what. Divided into two categories:
1. Microeconomics- the branch of economics that studies th
new normal- unemployment rates might be stuck at high levels for many years. Monetary theoryinvolves using macroeconomic models to explore the relationship between changes in the money supply
and interest rates and changes in real GDP and the price level.
Will Investors Lose Their Shirts in the Market for Treasury
Treasury bonds have little default risk as the U.S. government is
almost certain to make payments on its bonds.
In September 2012, many financial advisors wa
Money and the
Study Money, Banking and
An Overview of the Financial
What is Money
Why Study Money, Banking
and Financial Markets?
To examine how financial markets such as bond, s
Is Ben Bernanke Responsible for Japanese Firms Moving to the
The increase in the value of the Japanese yen following the financial
crisis made it more expensive for Japanese firms to export products to
The Behavior of
In this chapter, we examine how the overall level of nominal interest
rates is determined and which factors influence their behavior.
Identify the factors that affect the demand for assets.
Central Banks and the Federal
Has the Fed Become Too Powerful?
In 2010, the Dodd-Frank Act authorized an audit of the Feds emergency
In 2012, the House of Representatives authorized the General Accounting
Office to audit t
Basic Facts about Financial
Structure Throughout the World
Stocks are not the most important sources of external
financing for businesses.
Issuing marketable debt and equity securities is not the
The Risk and Term
Identify and explain factors explaining the risk structure of interest
List and explain the three theories of why interest rates vary across
Searching for Yield
In the af
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Data Centers Architecture, Design and
qData Center Design
qTopology and Architecture
qModular Data Centers
qData Center Efficiency
Understand bank balance sheets.
Describe the basic operations of a commercial bank.
Explain how banks manage risk.
Explain the trends in the U.S. commercial banking industry.
To Buy a House, You
Recognize the key features of the banking system and the historical
context of the implementation of these features.
Explain how financial innovation led to the growth of the shadow
Money & Banking
Causes Slow Recovery
The sluggish recovery in the U.S. economy since the recession of 2008 is
evident in many measures of economic activity. According to the Federal
Reserves, such a slow pace is expected. It is, a typic
Money & Banking
Reasons For the Sluggish Global Economic Growth
The article by Fox News lists down a number of factors that caused the
sluggishness in the global economy, mainly due to the currency exchange rates
that have been fluctuating and messing wit
Faults of the AD-AS curve:
Assumed full employment level of real GDP remains constant when it really
increases each year
Explains price level but not changes in price level (inflation)
Doesnt explicitly consider how the fed reacts to changing economic
Primary dealer credit facility- allowed primary dealers to borrow overnight using mortgage backed securities
Term securities lending facility- the fed would loan up to 200 billion of treasury securities in exchange for mortgage
ECON 0280 Problem Set 9 Solutions
1. Four methods: borrow in the interbank market, borrow from the Fed via a discount loan; sell
securities; reduce (sell) loan portfolio. Assume that the bank requires $1m reserves in these
a) Interbank loan-cost
ECON 0280 Problem Set 3 Solutions (Burton/Brown Chapter 6)
2. Explain why a yield curve can be negatively sloped. Would interest rates be
abnormally high or low? What would be the overall expectation of the direction of
future short-term interest rates?
ECON 0280 Problem Set 7 Solutions
5. What is a depository institution? What are the main types of depository
institutions? What distinguishes them from other intermediaries?
A depository institution has a large part of its liabilities in the form of depos
ECON 0280 Problem Set 4 Solutions (Burton/Brown Chapter 13)
3. What roles do Moodys and Standard & Poors play in the bond market?
Moodys and Standard & Poors are bond-rating agencies. They analyze and evaluate bonds
and assign them to a particular risk cl
ECON 0280 Problem Set 2 Solutions (Burton/Brown Chapter 5)
4. During the Great Depression of the 1930s, nominal interest rates were close to
zero. Explain how real interest rates could be very high even though nominal
interest rates were very low. (Hint:
ECON 0280 Problem Set 6 Solutions
7. If interest rates in the United States were lower than rates in the rest of the world,
would the United States be more likely to be experiencing a net capital inflow or a net
capital outflow? Ceteris paribus, would the
Out of the Park Promotions and Memorabilia, Inc.
Embroidery machines capacity is only 27,000 machine hours
World Series Promotional Material (Job Y)
Estimated DL cost
Estimated DL hours
Estimated DM cost
Estimated variable MOH cost
Its Good Fishing in Troubled Waters
In 1861, America was divided by civil war. Split into two halves, North and
South, the opposing sides fought for four years, destroying families and killing thousands
in the process. It is considered the bloodiest war i
Expected Return on Plan Assets = $
Actual Return on Plan Assets = $
Non - U.S.
Unexpected Loss = $
This amount is added as a loss to the accumulated other comprehensive income account
in the pension and
Gambling: The Essence of the Stock Market
By the late seventeenth century, the stock market had already begun to take form.
Common practices used today such as trading in futures, options, and other techniques of
speculation had become fashionable amongst
1.) Btown's method of accounting for parts inverntoy is apporpriate because these expenditures
do not extend the useuful life of the asset they are used for, which would be the buses.
The parts are only used for rotuine repiars and upkeep for the buses, t