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(Saving, Investment, and the Financial System, The basic tool of Finance) Please answer ONE of the following questions:

1. What is the role of the financial system?  Name and describe two markets that are part of the financial system in the U.S. economy.  Name and describe two financial intermediaries.  What is the difference between savings and investment (according to economists) and what role does the financial system serve in bridging the gap between savings and investment?

OR

2. When company executives buy and sell stock based on private information they obtain as part of their jobs, they are engaged in insider trading.

A.  Give an example of inside information that might be useful for buying or selling stock?

B.  Those who trade stocks based on inside information usually earn very high rates of return.  Does this fact violate the efficient markets hypothesis?

C.  Insider trading is illegal.  Why do you suppose that is?

D.  Can you think of an example of a company/person who was engaging in insider trading?  What were the consequences of the insider trading?

Macroeconomics, Economics

  • Category:- Macroeconomics
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