Chapter 2 Flashcards
What are the two main functions of the government in relation to the financial markets?
Manage the economy
Regulation
What are the main objectives of government economic policy?
Price stability
Low unemployment
Balance of payments equilibrium
Economic growth
How does the government raise raise money apart from taxes?
Issue gilts and treasury bills
What us fiscal policy?
It is the process by which the government attempts to influence the level of economic activity through government spending, taxation and borrowing.
If the government increase tariffs on imports what is the sim of this?
To increase demand for domestic supply’s and increase the surplus in the balance of payment s
What is the key component of monetary policy?
It affects the interest rates to manage inflation.
What happens if the Mpc inflation target is missed?
They will raise the bank rate if inflation is too high and reduce it if inflation is too low
What is disinflation?
Falling inflation
What is deflation?
A sustained reduction in prices across the economy
What is the rpi?
An index based on a basket of goods that reflect the expenditure of the average household.
What happens if the pound rises agains the euro for imports and exports.
Exports become more expensive for euro zone countries to buy.
Imports become cheaper
What is M0 and M4
MO is narrow money. It’s is all the coins and notes and operational balances of U.K. banks.
M4 is broad money. Measures banks deposits and new money created through overdrafts and loans
What are the five levels of regulation?
Eu legislation Acts of parliament Regulatory bodies Financial institutions Arbitration schemes
What did the 1979 case of cassis de Dijon establish?
Established the principle of mutual recognition by member states of national rules of individual states.
What can be moved freely across the eu?
People
Goods
Capital
Services
