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2 years ago

Provide a comprehensive discussion of information asymmetry in financial intermediation.

Business

1 answer:

Zigmanuir [339]2 years ago

3 0

The introduction of intermediaries helps in minimizing the asymmetric information gap by becoming experts.

<h3>What is information asymmetry?</h3>

Information Asymmetry deals with the study of decisions in transactions where one party has more or better information.

The financial intermediary establishes trust by providing a form of guarantee of investment performance to the buyer of securities and a fair price to the sellers of securities.

Learn more about Information asymmetry here:

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The date,
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Suppose First Main Street Bank, Second Republic Bank, and Third Fidelity Bank all have zero excess reserves. The required reserv

dlinn [17]

Answer:

Change in Excess Reserves $1,350,000

Change in Required Reserves $450,000

Explanation:

Preparation of the table to show the effect of a new deposit on excess and required reserves

Based on the information given since the REQUIRED RESERVE RATIO is 25%, which means that First Main Street Bank will hold 25% of its initial deposit leading to INCREASE in the REQUIRED RESERVE by the amount of $450,000 (25%*$1,800,000) while the remaining 75% (100%-25%) will be the EXCESS RESERVES of the amount of $1,350,000 (75%*$1,800,000).

Hence:

Amount Deposited: $1,800,000

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Change in Required Reserves= $450,000

Therefore the effect of a new deposit on excess and required reserves will be:

Change in Excess Reserves $1,350,000

Change in Required Reserves $450,000

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3 years ago

Steven lives in a big city where there is a shortage of parking. He has a parking spot in his driveway where he parks his car. W

DENIUS [597]

Answer:

The correct answer is option C.

Explanation:

The opportunity cost of any economic decision is the cost of giving up its alternative. We are aware that we have limited resources with alternative uses and we have to use these resources to satisfy alternative needs and wants. In order to increase spending resources on one thing, we need to decrease spending on its alternative.

Here, the parking spot on the driveway can be used for personal use or can be used for renting. The opportunity cost of using the spot for personal parking is the money that could have been earned by renting it to others.

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3 years ago

If a manufacturing process takes 4 hours per unit of x and 2 hours per unit of y and a maximum of 100 hours of manufacturing pro

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Answer:

The algebraic formulation of the constraint is 4X+2Y ≤ 100

Explanation:

The algebraic formulation of the constraint is shown below:

Given that

The number of hours taken per unit of x is 4 hours

And the number of hours taken per unit of x is 2 hours

And, the maximum hours available is 100

Now based on the above information

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= 4X+2Y ≤ 100

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3 years ago

What are the primary functions of a central bank?

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Answer:

The correct answer is:

Conduct monetary policy;
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Explanation:

A central bank is the apex monetary authority in a country. It plays several crucial roles in the smooth working of the economy.

A central bank issues currency on behalf of the government.
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The role of providing services to businesses and consumers is played by commercial banks. Fiscal policy is formulated by the government. The responsibility of ensuring the growth of the economy also falls with the government.

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