Briefly describe the following types of financial intermediaries:
1. Commercial bank
2. Investment bank
3. Mutual fund
4. Hedge fund
5. Pension fund
6. Insurance company
1. A commercial bank is a company that takes in deposits and makes loans to households and firms.
2. An investment bank is a company that provides advice to firms issuing new securities, underwrites the issuing of securities, and develops new securities.
3. A mutual fund is a company that sells shares to investors and uses the funds to buy stocks, bonds, or other financial securities.
4. A hedge fund is a company that obtains funds primarily from wealthy investors and and uses the funds to make complicated, and often risky, investments.
5. A pension fund is an institution that receives contributions from workers and uses the funds received to invest in financial securities to fund retirement benefits.
6. An insurance company is a company that sells insurance policies to households and firms and uses the funds received to invest in financial securities.
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Consider two firms that are in the same industry and the industry is competitive. Initially each firm employees equal amounts of type A and type B labor
Labor is perfectly mobile between the two firms, and type A and type B labor are perfect substitutes. Diagram separately the equilibrium conditions in the labor markets for type A and type B labor. What must be true about the wages both firms face? Why? Now assume that one of the firms decides not to hire type A labor due to some type of discrimination. What do you think will happen to the type A labor supply for both firms? How do you think the action will affect the wages for type A labor relative to type B? Why?
What is the most likely result when the price of a good with elastic demand is raised by 10 percent?
(A) The quantity sold will decrease by 15 percent. (B) The quantity sold will increase by 10 percent. (C) The quantity sold will decrease by 10 percent. (D) The quantity sold will decrease by 5 percent.