2. The Role Of Government Flashcards
What are the Government’s 2 main functions in relation to financial markets?
Managing the economy
Regulation
What are the 4 main objectives of economic policy?
Price stability
Low unemployment
Balance of Payments equilibrium
Economic growth
How can a BoP deficit be corrected? (3 measures)
Increase interest rates to attract foreign currency (but stifles domestic growth)
Tariffs and quotas to limit imports
Exchange controls e.g pegging
What is the term for the level of government borrowing?
Public Sector Net Cash Requirement
What are the pros and cons of expansionary fiscal policy?
Pros:
Encourages investment/growth/employment
Cons:
Increased borrowing/interest
Inflationary
What are the pros and cons of contractionary fiscal policy?
Pros:
Dampens demand, reducing available cash
Deflationary
Cons:
Stifles growth
Causes unemployment
What are the 4 NI Classes?
Class 1: paid by employees and employers
Class 2: self employed flat rate
Class 3: self employed voluntary
Class 4: self employed % of earnings
What are the 4 main CGT exemptions?
Principal private residence
Gilts & corporate bonds
Motor vehicles for normal use
Chattels; personal possessions <£6k
What are the NRB for inheritance tax, and the tax rate?
NRB £325k
Property NRB lower of £175k and value of property
Tax rate 40%
What are the 4 key features of the BoE Monetary Policy Committee?
Sets base rate
9 members
Meets 8 times a year
If inflation is >1% above or below target, governor has to write to chancellor
What are the 3 main ways QE affects the economy?
Increases the price of bonds, reducing yields, causing investors to switch to other asset classes. Lower yields = lower interest rates
Improves capital market conditions - easier to borrow
Increases money supply (inflationary)
What are the 2 types of money supply?
M0 - notes + coins
M4 - broad money - bank deposits and new money created by loans & overdrafts
Difference between deflation and disinflation?
Deflation = prices falling
Disinflation = rate of inflation slowing
What are the 3 main measures of inflation?
CPI; basket of goods and services
RPI; CPI + mortgage and housing costs
Average weekly earnings
What are the 10 main types of state benefits?
Sickness & Disability
Statutory Sick Pay (28 weeks)
Employment & Support Allowance
Attendance Allowance (personal care)
Personal Independence Payment
Carer’s Allowance (16+, 35+ hrs /week)
Statutory Maternity Pay (39 weeks)
Statutory Paternity Pay (1 or 2 weeks)
Statutory Shared Parental Pay (ability to share 37 weeks SMP)
Who is eligible for Jobseekers Allowance?
Unemployed or working <16 hrs a week
Lower rate for 18-24
What are the key features of Universal Credit?
Means-tested for low income workers
Replaced 6 legacy benefits
Rolled out 2013, full transition by 2024
Claimants must commit to look for work
What are the recent changes in the State Pension Age?
2018: equalised men and women to 65
2020: 66
2026-28: 67
2046: 68
Outline the recent changes to the state pension?
Pre 6 April 2016:
Employed people could earn top ups
Payments based on 1-30 years NICs
On/After 6 April 2016:
No new top ups, but can keep top ups earned before Apr16
Payments based on 10-35 years NICs
What are the key features of Pension Credit?
Ensures minimum income for retirees
Men born before 6 April 1951
Women born before 6 April 1953
Higher for couples but both must meet age requirements
Savings >£10k treated as income
What are the 4 main responsibilities of Government in terms of regulation?
Acts of Parliament
Regulatory bodies
Policies & practices of financial institutions
Arbitration schemes eg Financial Ombudsman Service
Difference between EU Regulation and Directive?
Regulation: implemented directly in UK law
Directive: an objective achieved through UK laws
When was the Brexit transition period and what was the craic?
31 Jan 2020 - 31 Dec 2020
EU rules & regs still applied
What is onshoring and who has the power?
Amending financial services regulations post-Brexit
FCA and PRA have delegated authority for financial services sector
