CHAPTER 1 SECTION 3

Question 1

Is UK part of European Monetary Union & what is impact of this?

Answer 1

NO as we DO NOT use EURO meaning we have GREATER FISCAL CONTROL.

Question 2

What are the 3 objectives of the FINANCIAL SERVICES ACTION PLAN?

Answer 2

1. Create single market for FS
2. Provide open & secure retail markets
3. Introduce Prudential rules & Supervision

Question 3

Who is ultimately responsible for the regulation of the UK FINANCIAL SERVICES MARKET?

Answer 3

The TREASURY under direct authority of the CHANCELLOR OF THE EXCHEQUER.

Question 4

What was the impact of the Financial Services & Marketing ACT (2000)?

Answer 4

Created 3 bodies:

1. Financial Services Authority (FSA): UK’s SOLE REGULATOR responsibility of Chancellor & Treasury
2. Financial Osbudsman Service: SOLE OSBUDSMAN handling complaints
3. Financial Services Compensation Scheme: Sole compensation scheme for consumers

Question 5

What was the impact of Financial Services Act (2012)?

Answer 5

Replaced FSA as sole UK regulator creating 3 bodies:

1. Financial Policy Committee (FPC)
2. Prudential Regulation Authority (PRA)
3. Financial Conduct Authority (FCA).

Question 6

The current regulatory model means some organisations have two groups of supervisors. What are they?

Answer 6

1. PRA for FINANCIAL PRUDENCE

2. FCA for CONDUCT

Question 7

What is FISCAL policy?

Answer 7

Governmental control of taxation, borrowing & spending.

Question 8

What is monetary policy?

Answer 8

Control of interest rates & money supplies.

Question 9

Who is in charge of monetary policy?

Answer 9

The Bank of Englands Monetary Policy Committee (MPC)

Question 10

What is a method used to increase money supplies into the economy?

Answer 10

Quantitative Easing.

Question 11

What is the ‘Balance of Payments’?

Answer 11

Statement of ALL transactions made between entities in one country & the rest of the world over a defined period of time (usually 1 year).

Question 12

What department issues GILTS which can then be used by the government to borrow money from individuals & institutions?

Answer 12

Debt Management Office (PART OF TREASURY)

Question 13

What is factory gate pricing & what costs does it include?

Answer 13

Cost of manufacturing goods before markup is added for profit.
Includes DIRECT costs such as labour & raw materials
Includes INDIRECT costs eg: interest on loans & taxation