Financial Markets Flashcards

1
Q

Define Financial Markets ?

A

A financial market is any exchange that facilitates the trading of financial assets

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2
Q

What are the different types of financial markets?

A

MONEY MARKETS=Provide short term finance by lending.

CAPITAL MARKETS=Provides long term finance through lending

FOREIGN EXCHANGE MARKETS= this is where different currencies are traded

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3
Q

What are the roles of financial markets=

A

-To facilitate savings

-To lend to businesses and individuals

-To facilitate exchange of goods and services=To allow for transfer of money in order to allow exchange of goods and services.

-To provide forward markets=To allow for firms to buy currency in advance at a fixed costs. In the future.

-To provide a market for equities=Allow for a stock exchange.

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4
Q

What is a liquidity trap?

A

When there is a low interest rates and savings are high.

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5
Q

What are some financial market failures?

A

-Asymmetric info

-Externalities

-Moral hazard

-Speculation and market bubbles

-Market rigging

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6
Q

Role of the central bank?

A

-Banker to bankers=lenders of last resort
-Banker to government
-Implement monetary policy
-Regulating the banking industry

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7
Q
A
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