Borrowers Flashcards

1
Q

How does the government borrow money?

A

Through long dated securities called gilts, short dated securities called treasury bills. Money is also borrowed directly from the public in the form of national savings schemes.

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2
Q

Public sector borrowing requirement

A

The difference between the government’s total revenue and its total expenditure.

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3
Q

Gilt-edged securities

A

Bonds issued by the government, so-called because of the near certainty that they will be repaid. Something is gilded or gilt-edged if there is a fine layer of gold leaf applied e.g. on the pages of a book

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4
Q

What are the three categories of government gilts?

A

Conventional, index-linked and the irredeemables.

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5
Q

What are conventional gilts?

A

Conventional gilts pay a fixed rate of interest twice a year and have repayment dates varying from five to thirty years.

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6
Q

What are index-linked gilts?

A

These pay a low rate of interest (1-4 per cent) but this interest, and the repayment value of the bonds, is linked to the retail price index.

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7
Q

What are irredeemable gilts?

A

These are a historical throwback, which are literally issues that will not be repaid. Examples include Consols and War Loan.

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