Financial Sector

Question 1

Fisher equation

Answer 1

Quantity of money In circulation increases the price level will also

Money velocity = price level

Question 2

Role of finacial sector

Answer 2

Facilitate savings

Lend to businesses and promote econ growth

Exchange of goods and services

Question 3

Harrod domar model

Answer 3

Savings - investment - capital accumulation- output and income

Question 4

Micro finance

Answer 4

Borrowing small amount of money from private lenders in LDC’s to finace enterprises

Question 5

IMF role

Answer 5

Regulate ER

Monetary cooperation

Deal with imbalances on BOP

Provides international coordination- loans

Question 6

Role of central bank

Answer 6

Set interest

Act as banker for commercial banks

Manage govt borrowing

Issue money

Question 7

Narrow and broad money

Answer 7

Narrow - most liquid money and coins

B-road - includes narrow plus things like savings and credit

Question 8

WTO

Answer 8

Deals with rules of trade between nations on global level

Pros

Greater competition
Specialisation to gain from EOS
Less retaliation

Cons

Favour rich countries
Reduce domestic employment - infant industries (E) sunset