How Does Goldman Sachs as a Firm Manage Issues Around

question 7

Multiple Choice

How does Goldman Sachs as a firm manage issues around hidden information and hidden action of the firm's traders (agents) ?

• A)Monitoring at the department level only
• B)Employee incentive based pay in the form of bonuses
• C)A 30-member risk committee to examine the value at risk
• D)Objective alignment between the firm and shareholders
• E)A hedging program

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Definitions:

Money Supply

Refers to the total amount of money available in an economy at a particular point in time, including cash and deposits.

Fed

The central banking system in the United States, known as the Federal Reserve System, is in charge of managing the country's monetary policy.

Open Market

A marketplace that is open to all participants and where goods, securities, currencies, and other items can be bought and sold.

Simple Money Multiplier

A formula used to determine the maximum amount of money that can be created by a bank's deposits under a fractional reserve banking system.