How do central banks impact interest rates in the economy?

July 8, 2024 No Comments

A: The central bank for the United States – the Federal Reserve (the Fed) – is tasked with maintaining a certain level of stability within the country’s financial system. Specific tools are afforded the Fed that allow for changes to broad monetary policies intended to implement the

How do modern companies assess business risk?

July 8, 2024 No Comments

A: Before a business can assess or mitigate business risk, it must first identify probable or likely risks to its bottom line. There is no surefire method for identification or assessment, but firms rely on reasonable approximations based on past experience. Risk processes naturally evolve

How do changes in interest rates affect the spending habits in the economy?

July 8, 2024 No Comments

A: Changes in interest rates can have different effects on consumer spending habits depending on a number of factors, including current rate levels, expected future rate changes, consumer confidence and the overall health of the economy. It’s possible for interest rate changes, either up or

How do modern corporations deal with agency problems?

July 8, 2024 No Comments

A: Agency problems—also known as principal-agent problems or asymmetric information-driven conflicts of interest—are inherent in static corporate structures. This conflict arises when separate parties in a business relationship, such as a corporation’s managers and shareholders, or principals and agents, have disparate interests. Principals hire agents

How do companies use price discrimination?

July 8, 2024 No Comments

A: Price discrimination is a strategy that companies use to charge different prices for the same goods or services to different customers. The three main types of price discrimination are first degree, second degree and third degree. Companies use these types of price discrimination to

How do NGOs get funding?

July 8, 2024 No Comments

A: A non-governmental organization (NGO) is a non-profit, citizen-based group that functions independently of government. NGOs are organized on local, national and international levels to serve specific social or political purposes. As non-profit organizations, NGOs rely on a variety of sources for funding projects, operations,

How do economies of scale work with globalization?

July 8, 2024 No Comments

A: Globalization – the integration of factors of production and inclusion of consumer groups from different markets around the world – facilitates unprecedented achievements of economies of scale for producers. Access to increased numbers of laborers, investors, markets, resources, technologies and business models through globalization

How do Economies of Scope and Economies of Scale Differ?

July 8, 2024 No Comments

A: Economy of scope and economy of scale are two different concepts used to help cut a company’s costs. Economies of scope focuses on the average total cost of production of a variety of goods, whereas economies of scale focuses on the cost advantage that arises when there is

How do economists measure positive and negative externalities?

July 8, 2024 No Comments

A: In economics, an externality is defined as a cost or benefit incurred by a third party as a result of economic activity to which the third party has no relation. Economists use equilibrium models that succinctly measure externalities as a deadweight loss or gain

How do financial market exhibit asymmetric information?

July 8, 2024 No Comments

A: Financial markets exhibit asymmetric information in that in a financial transaction, one of the two parties involved will have more information than the other and will have the ability to make a more informed decision. When it comes to the purchase or sale of

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