How the Flow of Funds Affects Bank Performance I

n recent years, Carson Company has requested the services listed below from Blazo Financial, a financial conglomerate. These transactions have created a flow of funds between Carson Company and Blazo.

a. Classify each service according to how Blazo benefits from the service.

Advising on possible targets that Carson may acquire

Futures contract transactions

Options contract transactions

Interest rate derivative transactions

Loans

Line of credit

Purchase of short-term CDs

Checking account

b. Explain why Blazos performance from providing these services to Carson Company and other firms will decline if economic growth is reduced. c. Given the potential impact of slow economic growth on a banks performance, do you think that commercial banks would prefer that the Fed use a restrictive monetary policy or an expansionary monetary policy?