An article in the Wall Street Journal on the use of artificial intelligence (AI) in the financial system stated that “similar to index-tracking funds, funds managed in part by artificial intelligence require less human intervention and therefore can often cost less to run.” The article also noted that banks are using AI to decrease the costs and increase the accuracy of compliance with government regulations.
a. What financial intermediary do “index-tracking funds” or “funds” refer to?
b. How does the use of AI affect labor productivity in the financial system? Briefly explain.
c. How would the financial system’s use of AI affect the rate of long-run economic growth? Briefly explain using the loanable funds model.