Question: Read the article (both parts) by Michael Lewis that is available in the “Financial Markets” folder in the External Links segment of Blackboard. Then, in 500 words or less, answer the following 3 questions. (The word limit does not apply to any graphs that you draw.) Please submit your response electronically. You may send it as an attachment or through the digital drop-box.

A. Early in his article, Michael Lewis refers to a “global crisis of confidence.”

a. How has a loss of confidence harmed financial markets?

b. How does this failure affect the “real” economy of GDP and employment?

B. Lewis refers to the “wacky” incentives that key people and institutions such as the SEC and the ratings agencies faced.

a. Choose one example, describe the incentives, and explain why they are wacky.

b. What can be done to improve the incentives?

C. Lewis chides the government for paying too much attention to the stock market. In Chapter 29, Case and Fair claim that the stock market has real effects. Is Lewis wrong in his claims? Why or why not?