Why did the interest rate volatility of the 1970s spur financial innovation?
What will be an ideal response?
Banks were very vulnerable to interest-rate risk in the mortgage loans. To protect themselves, banks began to issue adjustable-rate mortgages whose interest rate will increase along with market interest rates. Additionally financial derivatives were developed to help hedge against interest-rate risk.
Economics
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Comment on the following statement: "If one player in the game does not have a dominant strategy, it is impossible to predict the outcome of the game."
What will be an ideal response?
Economics
Fluctuations in total output are the reverse image of fluctuations in
A) the inflation rate. B) the unemployment rate. C) gross domestic product. D) the GDP deflator.
Economics