QUESTION 1 The chairman of the world's largest asset manager said in his 2020 Annual Letter to Companies that "The financial world is on the edge of a revolution. He went on to explain that this would imply: O The underprivileged in society demanding that wealth was spread more evenly O That new applications of derivative securities would enable a much more effective income re-distribution O That there would be "a realocation of capital" as a result of a change in the risk/ reward profile of different types of asset due to market re-pricing That the "winner take all" syndrome would result in the finance industry having only 5 large asset managers and a few specialised niche providers within 5 years.
Monetary Policy and Interest Rate
Monetary policy refers to the policy which is enforced by the central bank of the country to control the money supply and economic development of the country. The main aim of monetary policy is to manage inflation, consumption, and growth of the economy. The central bank influences interest rates to manage the money supply. In monetary policy, the central bank may revise the interest rate to increase and decrease the flow of money.
Development of the US Monetary System
The monetary system of a country refers to the system in which a government provides money in the economy of the country. In the modern-day monetary system, usually it contains the National Treasury, the mint where the notes are being printed. The Central bank and the commercial banks regulate the money supply in the economy of a country.
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