The former chairman of the federal reserve, alan greenspan, used the term "irrational exuberance" in 1996 to describe the high levels of optimism among stock market investors at the time. stock market indexes such as the s& p composite price index were at an all-time high. some commentators believed that the fed should intervene to slow the expansion of the economy. why would central banks want to clamp down when the economy is growing? a. to block the formation of unsustainable speculative asset bubbles. b. to curtail excessive profits in the banking system. c. to prevent inflationary forces from gathering momentum. d. all of the above. e. a and c only.
A, B & C
Bonds generate a stable and constant cashflow for the holders and are not as risky as stock because bond holders at the very least are some of the people who will get priority in any monies raised if the company goes into liquidation. Bonds are debt so their interest are paid first from company revenue regardless of if profits were made or not further reinforcing that they are better than stock in terms of risk.
As mentioned in the text, bonds had flooded the market due to the low interest rates that the Fed kept. This is indeed because in a low interest rate environment, companies can offer bonds at lower coupon rates which reduces their cost of borrowing.
When the stock market is turbulent, the Fixed Income(bonds) market are a known safe haven that investors flee to because here they can earn stable incomes with less risk and because of the increase in demand, companies offer bonds and at lower rates too due to the Law of Supply.
A. A central bank provided direct control over all interest rates, facilitating the control and direction of the overall economy.
Rapid economic growth will require businesses and the economy to have unfettered access to funds and structures that will facilitate growth. Formation of corporations that will help with funding, the central bank giving out loans to businesses and forming private banks, and encouraging flow of funds from savers to enterpreneurs are ways in which economic growth is boosted.
However if a central bank provides direct control over all interest rates, facilitating the control and direction of the overall economy, it will limit economic growth.
a. agricultural and other u.s. interests were suspicious of centralized power and opposed the creation of a central bank.
There are just the first three I will do a bit ore in a while.
The American Revolution was started so as to get away from a strong, centralized government that the people did not want to have in their country. Obviously, a central bank is a good example of a centralized establishment, which is something the Americans fought against in their Revolution, and thus didn't want it back. *pshhh this totally isnt a stolen answer*
The answer is: Citizens feared that a central bank placed too much power in the hands of the federal government
At that time, the citizens feared that the move to establish the second bank of united states is the effort made by united states government to gained total control of the market. They afraid that if they allow it, the would no longer have the freedom to choose the type of business they want to establish and the government would make it hard to obtain loan for businesses that they did not approve of.