Archive for June, 2006
Corporate Bonds Offerings
June 23rd, 2006
Question: research involving industrially advanced countries suggests that?
A. the more independent the central bank, the lower the average annual growth of real GDP
B. the more independent the central bank, the higher the average annual growth of real GDP
C.there is no relationship between the degree of independence of a country's central bank and the growth rate of its real GDP
D. the less independent the central bank, the higher the average annual rate of inflation
within the past decade, congress has
A. permitted banks and thrifts to "self-insure" rather than participate in the FDIC system
B. allowed holders of government bonds to add these bonds to their insured checking accounts
C. ended restrictions on banks' merging with insurance companies, securities firms, and other firms offerings financial services
D. ended restrictions on banks' buying of non bank firms such as manufacturers, corporate farms, and real estate companies
Answer: Two completely independent questions in one post? A bit greedy, no?
(I) This question makes little sense as it stands.
1. Most of the "industrially advanced countries" do not have a central bank. France, Germany, Italy, and the other members of the Eurozone all have their money (i.e. the Euro) managed by the European Central Bank.
2. Are you going to count China as "an industrially advanced country"? Since it has been launching satellites for almost 40 years, has its own satellite based global navigation system, etc. it is hard not to
http://news.xinhuanet.com/english/2009-04/15/content_11187396.htm
But it also has an extraordinarily high GDP growth rate and would skew the results dramatically.
3. Over what period are we talking about? Looking at the last year, very few countries had GDP growing (that's why it has been a _global_ recession) and none of those that did had an independent central bank (i.e. China makes its presence felt)
Still, it is true that (D) the less independent the central bank, the higher the average annual rate of inflation. But that could be because most of the more independent central banks have as their sole job keeping inflation down
http://www.businessweek.com/magazine/content/05_45/b3958607.htm
http://en.wikipedia.org/wiki/Inflation_targeting
But the Fed, for example, does not have inflation as its sole target. It also has the goal of maximizing employment:
http://en.wikipedia.org/wiki/Federal_Reserve_System#Purpose
So, of course, it is not going to be able to do as good a job on inflation.
So, in evaluting answer (D) do you compare only banks with the same goals and different levels of independence or do you ignore all the other differences and use independence as your only criteria?
News Update: BP Plc Exploring Debt Financing Alternatives; Bank Loans or Bond Offerings
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