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Financial Markets and Institutions, - Essay Example

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Borrowing and lending of recently issued financial assets also occur in financial markets (Tesfatsion, 2012) since those “facilitate the flow of funds from investors with…
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Download file to see previous pages The impact of the United States to the world economy is connected to the activities happening in the NYSE (Harrison, 2011). Leading US companies have already participated in buying and selling of the shares of stocks in the NYSE. Since NYSE has been successful in trading these financial assets, its operations have expanded that now involve successful foreign companies (Kim, 2004, p. 61). The success of NYSE is crucial to the US economy because the companies listed in this financial market contribute to the nation’s economic growth. The NYSE serves as a mirror of America’s economic stability that if impeded will also have an impact to the global economy. The US economy has an effect on the global economy because the country has been active in having trade ties with other nations. If the US economy will stumble, then it can also be felt in other nations where foreign companies listed in the NYSE are headquartered.
When a borrower obtains a loan from a lender, interests are added to the original amount borrowed. Interest rates have to be paid to compensate the lender, since they have given the borrower the opportunity to get the money without having to wait for a couple of days, months, or years of saving it (Heakal, 2009). There are factors that affect the determination of interest rates, and these include inflation, government, and supply and demand. When speaking of supply and demand, this would imply that if the demand for credit rises, interest rates will also increase, but if it decreases, interest rates will decrease, as well.
Supply and demand have influenced interest rates in today’s economic climate. Because most people nowadays are into banking transactions, (e.g. when they open accounts in banks), money is being lent to those banks that in turn will be used by the bank for business or as an investment. Hence, the money deposited to the bank by the customer becomes the source of ...Download file to see next pagesRead More
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