ECO 301 Study Guide - Comprehensive Midterm Guide: Nasdaq, Market Clearing, Opportunity Cost
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5 Oct 2016
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Markets in which funds are transferred from people/firms with an excess of funds to people who have a need for funds. Have a direct effect on: individual wealth, behavior of business, efficiency of our economy. If financial markets are performing well effieciecy and individual wealth will increase because business is growing. 3 main financial markets: bond market, determines interest rates, cost of borrowing/lending money, stock market a. Investment/retirement decisions: foreign exchange market, affect imports/exports, where foreign currency is exchanged, has the power to affect other markets as well c. i. Ex unfavorable exchange rates of currency could affect decisions on whether money is invested in foreign securities. Channel funds from people who may not be using them to be productive to those who would but cannot. Money plays an important role in generating the business cycle. Recession (high unemployment) and expansion (low unemployment) affect us all. Borrowers borrow directly from lenders in financial markets by selling them securities.
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