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Kaplan Tier 1 Financial Planning > Australia's financial system and economic environment > Flashcards

Australia's financial system and economic environment Flashcards

1
Q

Should a modern financial system have a currency?

A

Yes.

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2
Q

What type of payment system should a modern financial system have?

A

Secure payment system.

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3
Q

What should a modern financial system facilitate the transfer of?

A

Funds and financial assets between savers and borrowers.

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4
Q

What should a modern financial system assist investors to balance?

A

Risk, liquidity and returns.

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5
Q

Should a modern financial system be efficient?

A

Yes.

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6
Q

What are the five categories that financial service needs for a household fall into?

A

Spending, borrowing, insurance, savings and investment.

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7
Q

What are financial service providers often referred to as?

A

Financial intermediaries.

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8
Q

What are financial service providers involved in?

A

Transfer of funds between borrowers and savers.

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9
Q

What are financial service providers an essential element in?

A

Allocation of financial resources for productive purposes.

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10
Q

What are the major financial service providers in Australia?

A

Banks, non-bank financial institutions and insurance companies.

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11
Q

What are the non-bank financial institutions in Australia?

A

Building societies, credit unions, finance companies, fund managers and mortgage lenders

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12
Q

What are the major financial markets?

A

Debt markets, equity markets, foreign exchange

markets and the derivatives market.

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13
Q

What are the four phases of business cycle?

A

Boom, contraction, recession and recovery.

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14
Q

What are four areas that affect the Australian economy?

A

Economic growth, inflation, unemployment and interest rates.

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15
Q

Why do governments and private agencies use economic indicators?

A

To predict future economic events.

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16
Q

What are two major responsibilities of the RBA?

A

The formulation and implementation of monetary policy, and the management and stability of the Australian currency.

17
Q

How does APRA monitor the exposure of banks?

A

Through liquidity management guidelines and capital adequacy standards.

18
Q

What is the balance of payments?

A

It is a summary statement of all domestic economic

transactions with the rest of the world during a given year.

19
Q

What are the main components of the balance of payment?

A

Current account, capital account and the financial account.

20
Q

What is the current account?

A

It is a record of the actual goods and services transactions between Australia and the rest of the world.

21
Q

What do changes in the current account have significant effect on?

A

Exchange rates.

22
Q

How can changes in the current account have an effect on exchange rate?

A

They directly affect the demand and supply of the currencies in the exchange market and they cause changes in asset yields.

23
Q

What is trade balance?

A

The trade balance is the difference in income between exports and imports.

24
Q

What does the capital account show?

A

The change in the nation’s assets abroad and foreign assets in the nation.

25
Q

What are terms of trade?

A

The relationship between the prices a country receives for its exports and the prices it pays for its imports.

26
Q

What is an exchange rate?

A

The price of one currency in terms of another.

27
Q

What is the exchange rate determined by?

A

Supply and demand.

28
Q

What can exchange rates be?

A

Fixed or floating.

29
Q

What is TWI?

A

An index of the value of the Australian dollar against a group or basket of currencies of Australia’s major trading partners.

30
Q

What do the increase in the value of the Australian dollar do?

A

Decrease the price of imports.

31
Q

Why does an increase in the Australian dollar decrease the price of imports?

A

Dollar will now purchase more foreign currency and therefore more goods.

32
Q

Is there a link between a depreciating exchange rate and rising inflation?

A

Yes.

33
Q

Does Australia have an aging population?

A

Yes.

34
Q

What has happened to Australian life expectancies?

A

They have increased.

35
Q

Does Australia have a high or low birth rate?

A

Low birth rate.

36
Q

Do Australians have adequate retirement savings?

A

No.

Kaplan Tier 1 Financial Planning (10 decks)

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