1. Explain what happens in an economy when the financial markets limit access to capital. How…
1. Explain what happens in an economy when the financial markets limit access to capital. How does this affect economic growth and employment?
2. How do bank failures cause the economy to go into recession?
3. You and your friend have opened an account on E-Trade and have each decided to select five similar companies in which to invest. You are diligent in monitoring your selections, tracking prices, current events, and actions taken by the company. Your friend chooses his companies randomly, pays no attention to the financial news, and spends his leisure time focused on everything besides his investments. Explain what might be the performance for each of your portfolios at the end of the year.