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2 years ago

DISCUSS WHY WE NEED BANKS IN THE FINANCIAL SYSTEM?

Business

1 answer:

zheka24 [161]2 years ago

3 0

Answer:

Because they play a role in the transmission of monetary policy and are one of the government's best tools for gaining economic growth without inflation.

<h3>What is a financial system?</h3>

The financial system is the process by which funds are transferred between those having excess funds(savers) and those needing additional funds(users).

<h3>What are banks?</h3>

A financial establishment that invests money deposited by customers, pays it out when required, makes loans at interest, and exchanges currency. The main function of commercial banks is to accept deposits and then to lend the same money (minus required reserves) back out. Banks make a profit by charging a higher interest rate on loans than the interest rate they pay on deposits. Through the loan process, banks are actually able to create money.

<h3>What is Monetary Policy?</h3>

Monetary Policy is regulating the money supply, controlling inflation/deflation, adjusting the interest rates to regulate the economy, the cost of money, and adjusting the band<u> reserve requirements</u>.

<h3>What is inflation?</h3>

Inflation is a sustained rise in the general price level in an economy over time. This does not mean that the price of every good and service increases, but on average the prices are rising. Therefore constitutes a reduction in purchasing power, where <u>GDP remains constant.</u>

<h3>So in the end, why are banks so important to the financial system and overall, the economy of America?</h3>

A well-functioning financial system is critical to the contemporary economy, and banks play critical roles in society. As a result, they must be safe. In both up and down markets, banks should be able to lend money to people and companies. Payments for products and services should also be completed quickly, securely, and affordably. If banks fail to carry out these responsibilities, the ramifications for the entire economy might swiftly grow so widespread that even the financial sector would be vulnerable to significant shocks. As a result, banks must be able to withstand losses while still meeting their present <u>payment obligations</u>. To do so, banks must adhere to <u>stringent regulatory restrictions</u>. The capital and liquidity (<u>money that can be paid quickly</u>) criteria that banks must fulfill in order to meet their present <em>payment obligations are among them</em>. The banks' internal payment systems must be safe and efficient as well.

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A stockbroker trades shares she does not own with an obligation of later repayment, and in the hope that the price of traded sha

xxTIMURxx [149]

Answer: short selling

Explanation: In simple words, short selling refers to the process in which an individual borrows stock from its holder with the promise of giving it back after a specific time and at a specific price, after borrowing he or she sells the stock at the current market price and expects that the price of stock will decrease in future.

The borrower then purchases the stock at a lower price and gives it back to the lender with the margin profit in his or her pocket. Short selling works like a speculation but only market experts do such activity due to high risk involved.

Such processes are of high value to the market as they result in creation of liquidity.

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4 years ago

Any work in the public domain can be used by any person, for any purpose.

Fudgin [204]

Answer:

True

Explanation:

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4 years ago

Read 2 more answers

When a business buyer decides to change specifications such as quality or options associated with products purchased in the past

vaieri [72.5K]

Modified rebuy
A company buyer is involved in a modified rebuy situation when they choose to alter parameters, such as quality or choices, for previously purchased goods.

MODIFIED REBUY - It is a purchasing scenario in which a person or business purchases items that have already been acquired, but modifies either the supplier or another aspect of the prior order. when a business is able to save a ton of time thanks to modified rebuy, businesses keep lists of supplies and goods that can be repurchased from the same source or another supplier from a pre-approved list who has already been on board and is familiar with the requirements. This modification indicates adjustments made to the supplier's or the client's needs.
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2 years ago

Coache Corporation is considering a capital budgeting project that would require an investment of $120,000 in equipment with a 4

Kaylis [27]

Answer:

a. $44,000

Explanation:

The computation of the total cash flow net of income taxes in year 3 is shown below:

= Incremental sales - annual incremental cash operating expenses - one-time renovation expense - depreciation expense - income tax expense + depreciation expense

= $310,000 - $230,000 - $30,000 - $30,000 - $6,000 + $30,000

= $44,000

Since depreciation is a non-cash expense so it would be added back to the computation part

The depreciation expense would be

= (Original cost - residual value) ÷ (useful life)

= ($120,000 - $0) ÷ (4 years)

= ($120,000) ÷ (4 years)

= $30,000

And, the income tax expense would be

= (Incremental sales - annual incremental cash operating expenses - one-time renovation expense - depreciation expense) × tax rate

= ($310,000 - $230,000 - $30,000 - $30,000) × 30%

= $20,000 × 30%

= $6,000

6 0

3 years ago

A Japanese insurance company purchases U.S. government securities. From the perspective of the United States, the balance of tra

Helga [31]

Answer:

a. not change; improve

Explanation:

Balance of trade is the difference in value over a period of time between a country’s imports and exports of goods and services, usually expressed in the unit of currency of a particular country (e.g., dollars for the United States, yen for the Japan).

Balance of payments record the receipts and payments of the residents of the country in their transactions with residents of other countries.

A Japanese insurance company purchases U.S. government securities. From the perspective of the United States, the balance of trade with Japan will not change and the balance of payments with Japan will improve.

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3 years ago