Financial Markets Flashcards
Define Financial Markets ?
A financial market is any exchange that facilitates the trading of financial assets
What are the different types of financial markets?
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
What are the roles of financial markets=
-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.
What is a liquidity trap?
When there is a low interest rates and savings are high.
What are some financial market failures?
-Asymmetric info
-Externalities
-Moral hazard
-Speculation and market bubbles
-Market rigging
Role of the central bank?
-Banker to bankers=lenders of last resort
-Banker to government
-Implement monetary policy
-Regulating the banking industry