ECON 2035 Chapter : Notes Test 1 - Ch 2-6
Document Summary
Financial crisis (2007-2009: housing price collapse, defaults subprime mortgage, sever disruption fincancial markets, sharp up many interest rates, down credit flows, down asset prices, stagnant economic activity. Critical economic function: transfer funds from savers who spend less than their income to borrowers who want to spend more than their current income. Financial intermediaries: commercial banks, investment banks, savings and loan assoc. , crdit unions, insurance co. , mutual funds, hedge funds. Money market: short-term debt instruments: ex: u. s. treasury bills (t-bills), negotiable cds, commercial paper, bankers acceptances, repurchase agreements, federal funds, Capital market: debt w/ maturity > 1 year and equity: need examples. Develop expertise in searching out new borrowers and in evaluating their projects and prospects for payback. Potential borrowers who are most likely to produce and undesirable (adverse) outcome i. e. bad credit risks are one who most actively seek out a loan and are thus most likely to be selected.
