1. What are financial markets? Critically discuss the extent to which financial markets can facilitate

economic growth and development. When are financial markets effective? Can financial regulation

help to ensure the efficiency of financial markets? Why? (

You must use specific regulations

)

2. How does the Federal Reserve of the US use financial markets to stabilize the US economy and the

value of the US dollar? In what situations can financial markets be ineffective mechanisms to

stabilize the US economy? Using the various theories of interest rates in the loanable funds market,

explain why the Fed may not always be able to successfully target short-term interest rate.