Financial Sector Flashcards

1
Q

Commodity Money

A

Items used as money and have an intrinsic value, i.e. their value exists even when not being used as money

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2
Q

Fiat Money/ Paper Money

A

by law it must be accepted in a transaction or in settlement of debt

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3
Q

Qualities of Money

A

portable, homogenous, divisible, durable

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4
Q

Functions of Money

A

medium of exchange, unit of account, standard for deferred payments and store of value

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5
Q

Advantages of using a credit card

A

convenient and easy, safer than carrying large sums of cash, good way to build credit score

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6
Q

Disadvantages of using a credit card

A

must be repaid by specific date to avoid interest charges

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7
Q

Financial Sector

A

the complex mix of a network of markets, businesses, governments, laws, institutions and households, interacting with each other

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8
Q

Financial Sector importance (macroecon)

A

It is important due to its role in channeling flows of money outside the circular flow of income back into the circular flow. eg customer or business loans

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9
Q

Informal Sector

A

The part of the economy where economic activities are not under official control and don’t follow laws, controls and regulation systems

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10
Q

Benefits of Informal Sector

A

provides jobs, growth of entrepreneurial activity in lower income groups, contributes to material wellbeing

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11
Q

Disadvantages of Informal sector

A

low wages, no job security, don’t abide by tax and labour regulations

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12
Q

Informal sources for loans

A

friends, family, pawnbrokers, moneylenders

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13
Q

Why does the informal sector prosper?

A

ease of entry, family ownership, small scale ownership, unregulated markets, competitive markets

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14
Q

Role of Formal sector

A

makes loanable funds available from savers to spenders for consumption and investment

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15
Q

Financial Institutions

A

commercial banks, building societies, development bank, stock exchange, insurance companies, credit unions

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16
Q

Reasons for holding money

A

speculative, precautionary, transactionary

17
Q

Money Supply

A

Total stock of money currently being circulated in an economy and controlled by the central bank

18
Q

Mo/narrow money

A

currency in circulation (notes+coins)

19
Q

M1

A

this equals Mo+demand deposits (balances held in chequing or current accounts)

20
Q

M2

A

this equals M1+savings and deposits at building societies