Money and banking

 

post has three assignments

1a. Assuming there are differences in interest rates between countries and prices are relatively sticky, exchange rates
fluctuate because of the BOP inequality. Interest rate parity assumes that the asset markets have a greater effect on
exchange rates than the goods market.
Interest rates change due to macroeconomic shocks, such as fiscal policy and/or monetary policy, monetary
policy being a tool for economies with floating exchange rates only. For economies with a fixed exchange rate, monetary
policy is only used to defend the fixed exchange rate or counteract changes of the interest rate due to fiscal policy (goods
market shock). One of the disadvantages of an economy with a fixed exchange rate is that monetary policy cannot be used
to stimulate the economy, whereas an economy with a floating exchange rate like the U.S. can use monetary policy to
stimulate economic growth.
When there is a macroeconomic shock, interest rates in the domestic economy change relative to foreign interest
rates. For example, if there is an expansionary monetary policy, it will decrease the interest rate in the domestic economy
and domestic investors will have an incentive to invest in the foreign market, which will cause a capital account deficit and
cause the exchange rate to fall. The monetary expansion also increases domestic income, which will cause an increase in
imports and a current account deficit as well. Because the domestic money supply increases in the foreign market due to an
increase in imports and net capital outflows, it causes the domestic currency to depreciate in value due to the simple
relationship between supply and demand. The fall in the exchange rate will make domestic capital more attractive for
foreign investors and the domestic economy will begin to attract more foreign investment as the exchange rate falls until
the BOP equals zero, resulting in interest rate parity.

1b. The BOP factors that influence the supply for domestic currency in the foreign economies are an increase in imports
and an increase in capital outflows in pursuit of higher rates of return. These factors cause a BOP deficit in the domestic
economy and are mostly influenced by expansionary monetary policy that causes a reduction in the domestic interest rate.

1c. The BOP factors that influence the demand for domestic currency in the foreign economies are an increase in exports
and an increase in capital inflows where foreign investors are in pursuit of higher rates of return in the domestic economy.
Also, if the domestic economy is increasing exports, it means that domestic goods are relatively cheaper than foreign
goods. So, foreigners will demand more domestic currency as they import more of domestic exports. If the domestic rate of
returns is higher relative to foreign economies, there will be an increase in demand for the domestic currency as foreign
investors will need domestic currency to purchase domestic capital.

2a. Under flexible exchange rates and relatively responsive capital flows, we can determine that any change in the capital
financial account is going to be greater in magnitude than a change in the capital account and the EE curve will be
relatively flat compared to the LM curve. A fiscal expansion shifts the IS curve up and to the right, causing interest rates
and output (y) to increase. The increase in interest rates will cause an inflow of KA and a demand for domestic currency
greater in magnitude than the CA deficit caused by rising incomes which increases imports relative to exports. This causes
a BOP surplus, which causes the exchange rate to appreciate and cause the EE curve to shift up and to the left. The
exchange rate will appreciate to the point where the BOP comes back to equilibrium. As the exchange rate appreciates, the
rate of return on domestic capital gets smaller due to diminishing marginal returns, which will decrease the rate of capital
inflows to the domestic economy and will cause the exchange rate to depreciate until the BOP is back to equilibrium.

2b. A monetary expansion will cause a down and rightward shift of the LM curve, which will cause a decrease in interest
rates and a reverse effect in interest rates caused by fiscal expansion. The increase in the money supply will cause interest
rates to go down and the exchange rate to depreciate as a result. Therefore, if monetary expansion is used to pay for the
fiscal expansion, there is no need for the exchange rate to adjust and the market will come back to equilibrium through the
two policies counteracting each other.
3a. The curve that best represents money demand is the IS curve as it represents the goods market equilibrium. The
demand for goods and services directly influences the demand for money because in order to purchase goods and services
one needs money. The equilibrium condition of Y = C+I+ (G-T) + (EX-IM) is that leakages equal injections, S+T+IM = I+G+EX.

3b. The interest rate acts as the opportunity cost of money because it represents the income from holding money. If the
interest rate is rising, so is the opportunity cost and it will give an incentive for investors and consumers to deposit more
money in banks at a low risk or invest in other very low risk investments. Since interest rates are high, the cost of acquiring
capital assets and goods and services will be high as well, which will reduce the expected profits to be made off the initial
investment in capital. Therefore, if interest rates fall the price of goods and services fall and the cost of acquiring capital at
a low interest rate falls as well. This allows for investment in capital to have higher profits and higher expected rates of
returns. When interest rates fall, so does the opportunity cost of holding money. So households have an incentive to invest
in financial assets that are more risky (but have the potential for higher rates of return) than to keep the money in a
savings account with a low interest rate. The lower interest rate also causes an increase in consumption because goods and
services are relatively cheaper to finance due to the lower interest rate.

4a.

4b. If the foreign money supply increases relative to the U.S. domestic money supply, it will cause the spot exchange rate to
rise because an increase in the foreign money supply consequently depreciates the foreign currency relative to the U.S.
dollar, which will make the dollar stronger and in higher demand relative to the foreign currency in the spot market. If the
foreign money supply is increasing, this suggests that the foreign economy is investing in domestic assets in pursuit of
higher rates of return. This results in a higher demand for the dollar and upward pressure on the spot exchange rate. The
higher spot exchange rate will have the opposite effect on the forward exchange rate and the forward exchange rate will
fall. Since foreign investors will eventually want to realize the gains from their investment, they will demand more of their
currency in the forward market when they sell their assets and want to convert the proceeds from their investment in
dollars to their own currency. This will cause an increase in supply of the dollar and cause the exchange rate to fall. The
forward market is used to hedge against that risk since foreign investors want a strong dollar when it is time to convert to
their own currency because it will take more foreign currency to purchase the dollar.

5a. A monetary contraction causes an initial BOP surplus because it shifts the LM curve up and to the left and moves the LM
curve up along the downward sloping IS curve. A monetary contraction decreases the money supply and causes interest
rates to increase as well as income to decrease. The increase in interest rates will cause a net inflow of capital and a capital
account surplus. The decrease in income will result in a decrease in imports, an increase in exports, and a current account
surplus. This unambiguously results in a BOP surplus.

5b. A fiscal expansion would shift the IS curve up and to the right. With government expenditure increasing, taxes
decreasing, or both, the interest rate will increase and income will increase as well. The increase in interest rates will result
in net capital inflows and a capital account surplus. The increase in income will give consumers more money for imports
and cause a current account deficit. Under fixed exchange rates, monetary contraction should only take place if capital
flows are unresponsive, which would make the change in the current account greater in magnitude than the change in the
capital account. A current account deficit results in a BOP deficit, which would have downward pressure on the exchange
rate. Since the exchange rate is fixed, reducing the money supply through monetary contraction must take place to reverse
the effect and relieve the downward pressure on the exchange rate.

6a. In the presence of moral hazard and adverse selection, the expected nominal rate of return demanded by investors will
increase in order to compensate for the uncertainties and risks associated with moral hazard and adverse selection.
Moral hazard comes into play after a contract has been signed where the beneficiary, for example an insurance
policy holder, no longer has an incentive to act morally after the contract has been signed. For example, someone with car
insurance may not drive as responsibly because they are covered by an amount agreed upon in the contract. Someone
without insurance, on the other hand, has the incentive to be more careful when they drive because there are no funds
available to pay for damages if an accident occurs. Therefore, an insurance company (the investor in this case) must
include this moral hazard risk when underwriting an insurance policy.
Adverse selection reflects an information disadvantage where the investor cannot compile all the information
necessary to eliminate risk. The less information available about the risk, the higher nominal rate of return demanded by
investors. More information about the risk lowers the nominal rate of return demanded by investors because the risk is
reduced.

2: Educational behaviors problem in intermediate schools by using 2d animation

AWARNESS MOVIE

Introduction :
Competing of technology and rapid advancement in the field of information and communication increased concerns of
people and decreased the traditional social communication that replaced at this time by social networking, for that society
turns to unconventional way to obtain benefits, solutions and entertainment.
Teenagers and children are the most grantee of this technology because they have grown up within this communication
that changed the area of education and entertainment. In the field of education, instructions can be delivered using well
designed interactive multimedia, this technology enables instructional reach through effective learning strategies such as
warning and advice through 2D or 3D animation or animated cartoons, application and digital games. Nowadays YouTube
programs Spread widely and programs have abounded, on the other side many segments of society tended to follow all
this new media that include series, movies, motions and animations … what resulting to impact by this media whether they
are positive or negative.
therefore this proposal planning to developing the movies that targeted the main audience namely..children and teenagers
who could affected easily by the behaviors. So we resort to introduce edutainment software which aim to educate or
awareness at the same time entertain users is a good alternative to bring about behavioral change by engendering specific
social and cultural attitudes such as social issues and acceptable behaviors.
Use a new way of drawing and unique by adding graphic effects is a great style that could be used to make attracting
attention for audiences and introduce them what is the new in design as graphic, animation and multimedia ..that could
also make them looking to add new elements or create new effects in future to be supportive of educate and awareness
process, all of this contributes to developed Saudi media.

1 The Research Question
Educational behavior problems for students in the schools
Ones of these behaviors :
Smoking, cheating, argument the other students and teachers.

A. Aims And Objectives
1. Put the educational behavior problem in 2d motion graphic movie to make awareness for community in an
attracted way, in other case, Saudi society are conservative so they could not communicate their issues through realistic
media in strong way.
2. Create a new awareness method could make it easier for target audience themselves to respond the solution than
using traditional methods as advising, guiding or punishment.
3. In other side, looking to add new elements for Saudi animation as graphic effects.
4. Introduce the fields of design as graphic, animation and multimedia for the community.
B. Audience
teenagers in intermediate level school between 13-15 years old.
Why ?
1. Educational problems usually being started in this level.
2. they are in the level to discovering themselves and the world around so they should get awareness of wrong
habits by manner appropriate with their ages.
C. Context
The field of research will be in educational behaviors problem for students inside Saudi Arabia, level of intermediate
school. Consider for the wrong educational behaviors that the students are suffering of and search for the useful methods
of treatment for some of these problems.
the treatment and warning using visual style because The society -including the target audience could notice to the issue
further and faster if we use nontraditional methods like display movies especially that the visual thinking is the most
common and popular among people even if they have another type of thinking “Visual thinking is the phenomenon of
thinking through visual processing. Visual thinking has been described as seeing words as a series of pictures. Visual
thinking is common in approximately 60%–65% of the general population” a b c d e f Deza 2009, p. 526.
“As of May 2011, YouTube has 800 million monthly unique users worldwide who upload more than 48 hours of video to the
site every minute. People are watching more than 3 billion videos daily – that’s the equivalent of nearly half the world’s
population watching a YouTube video every day.54% of all Teens are on YouTube.
21.6 million of 40 million online users “ Statistics YouTube 2011, “ inside Saudi Arabia, masameer that consider as fourth
highest channel _ that talked about social issues and their impact in society_ is in the number of subscribers in country”
????? ?????? ????? ??????????? – YouTube. (2011-11-13). accessed 2011-11-21. That mean that teenagers make large
proportion of YouTube users and in other side large amount of them are fans with new idea of movies and animation.
“Animation is a technique that enables a series of static images to look as if they are alive, able to communicate verbally,
with action and with the ability to move . Animations are widely used in various industries such as advertisement,
entertainment, education and science. In Japan, animation is known as Anime. Anime is an art that can help adolescents to
shape and build their identities based on their favorite anime” Mohar, D. Bringing the outside in: One teachers ride on the
Anime highway, Language Arts. 8,2, 2003, pp.110-117. “Anime can also help develop various skills and abilities among
children” Frey, N. & Fisher, D. Using graphics novels, anime and the Internet in an urban high school. English Journal, 93,3,
2004, pp. 19. Therefore, we can use animation to educate children as well as adolescents about proper behaviors beside
entertain them.

“ reviewed 50 films released between 1937 and 1997 by 5 major production companies (Walt Disney Co, MGM/United
Artists, Warner Brothers Studios, Universal Studios, and 20th Century Fox) that were available on videotape for episodes of
tobacco and alcohol use. They found that more than two thirds of animated children’s films feature tobacco or alcohol use
in story plots without clear verbal messages of any negative long-term health effects associated with use of either
substance. Exposure to movie smoking is risk factor for habit formation. A Review of 40 selected studies on smoking in the
movies showed that smoking in movies increases adolescent smoking initiation. Exposure to movie smoking makes
viewers’ attitudes and beliefs about smoking and smokers more favorable and has a dose-response relationship with
adolescent smoking behavior “Charlesworth, A. & Glantz, S.A. Smoking in the Movies Increases Adolescent Smoking: Strong
empirical evidence indicates that smoking in movies increases adolescent smoking initiation. PEDIATRICS, 116, 6, 2005, pp.
1516-1528. children and adolescents could
interact with conducts and behavior in animation whether the behaviors are positive or negative, therefore developing
edutainment software which aim to educate or awareness at the same time entertain users is a good alternative to bring
about behavioral change by engendering specific social and cultural attitudes such as social issues and acceptable
behaviors.

2 Research Methodology¬
Make online discussion with number of student adviser how specialists on education or sociology, have experience by work
at governmental intermediate schools .. where the students there are the greatest percentage of the whole intermediate
schools’ students in Saudi Arabia, then pick up the most common educational behaviors problems there.

B. Evaluation
evaluations will taken from result of the movie voting
C. Output
2d motion graphic – medium, the time will be around 10 minutes.

Online discussion questions:

Name of the student advisor
Name of the intermediate school
Location of the school (which area in Saudi Arabia)

1. How many students in whole school?

2. How many students in each class?

3. What are the main behavior problems that confront you by students?

4. In your think, what are the main reasons that led to these behaviors?

5. What are your notes about those students ( e.g. social status )?

6. What are the solutions that you have taken to resolve these problems?

7. What extent you assess the success of these solutions ( could be percentage or approximate)?

8. Do you think there are better ways to make solving but you have not had the opportunity to apply?

3:Students Marketing

Solent University To support their corporate functions they require an extensive website to be built to provide the
following functions:

• Marketing to new students
• General information for enrolled students
• Lecturers’ websites and teaching materials
• Virtual learning environment (VLE)
• E-commerce – fee payment area
• Library
• Research interests

No feasibility study has been done but a budget of 1.8m has been set aside for this project. Following a recommendation,
they have hired your organisation run the project. A team of 4 consisting of a Finance Manager, a Requirements Analyst, a
Usability Manager and a Human Resources Manager (your group) have been allocated to manage the project. All planning
documentation is to be completed before beginning implementation on 30/5/2013.

As the university does not yet have office space you will have to hire facilities for the entire run of the project. You will
need to think about things such as staff (programmers, testers etc for the development team), when to employ people,
wages etc. You will also have to provide computers, desks and licensed software for the development team. All of these
items will need to be paid for from the budget.

As the university wants to open in September, you will need to think about how to provide the website content in a timely
fashion, i.e. marketing information is needed very quickly, but the VLE will not be needed until September 2013. The library
will need a catalogue for August 2013 but can exist without online borrowing facilities and resources until October 2013.

The new university’s stated aims are:
o To give an excellent student experience focusedon knowledge and skills essential for roles in theglobal
workforce.
o To contribute to sustainable economic, social, cultural and community regeneration and development
o To promote the discovery, development and application of knowledge through high quality research.
o To raise aspirations and to promote access to the University.

Produce a Gantt chart using MS Project (see notes for tutorial 8 and associated handout), which details the Delivery of the
products identified in the business case and scenario. Your plan must identify:
• the sequence of the activities,
• their dependency on any previous activities,
•

exchange rates