Financial Markets

Question 1

What are the three types of financial markets?

Answer 1

Money markets
Capital markets
- primary
- secondary
Currency markets 
- spot
- futures

Question 2

What is bought and sold in money markets?

Answer 2

Financial assets that have a maturity/payback date of a year or less

Question 3

What is bought and sold in capital markets?

Answer 3

Financial assets that have a maturity/payback date of more than a year

Question 4

What is the difference between the primary and secondary capital markets?

Answer 4

New issue market for first time buying of assets

Where these assets are bought and sold again, e.g trading in the stock exchange

Question 5

What are the functions of money?

Answer 5

Medium of exchange
Store of value
Measure of value
Standard of deferred payment

Question 6

What are the characteristics of money?

Answer 6

Acceptable
Portable
Durable
Divisible
Limited in supply
Difficult to forge

Question 7

What are the different types of money?

Answer 7

Notes & coins
Deposits
Near money - non cash assets

Question 8

What is liquidity?

Answer 8

The ease at which money can be converted into cash

Question 9

What is the money supply?

Answer 9

The total amount of money circulating in the economy

Question 10

What is the narrow money supply (M0)?

Answer 10

Total of all the notes and coins plus any deposits in the economy

Question 11

What is the broad money supply (M4)?

Answer 11

M0 plus non-cash financial assets with maturity dates of 5 years or less (ie that are still quite liquid)