Reference no: EM133048307

You should attempt to provide a balanced approach to the issue by considering alternative views. Accepted economic principles, theory and facts, not opinion, should be the basis for your arguments. Remember, in thinking about economic questions, we must distinguish questions of fact from questions of fairness. Questions involving ethical precepts and norms of fairness can only be resolved thorough political debate. I want positive economic arguments that come from analysis and empirical evidence, not normative economic arguments based on ethics or societal norms. Society determines the optimal mix - not economists.

1. Can you think of a reason why people in general do not lend money to one another to buy a house or a car ? How would your answer explain the existence of banks?

2. Some economists suspect that one of the reasons economies in developing countries grow so slowly is that they do not have well-developed financial markets. Does this argument make sense?

3. Financial regulation is similar, but not exactly the same, in industrialized countries. Discuss why it might be desirable-or undesirable-to have the same financial regulation across industrialized countries.

4. If mortgage rates rise from 5% to 10%, but the expected rate of increase in housing prices rises from 2% to 9%, are people more or less likely to buy houses ?