finical markets questions Flashcards
Explain two roles of finical markets
To facilitate savings by business and households, providing depositor protection and rewarding savers with a rate of interest as they sacrifice their liquidity
To lend to business and individuals, for example mortgages for home buyers
To facilitate the exchange of goods and services, this relates to the key functions of money as a medium of exchange and a unit of account
To provide a market for equities, allow business to fresh equity capital
Explain the impact of foregin ownership of uk assets on both the finical account and the current account of the UKs balance of payments?
The initial investment from china will be an inflow to direct investment flows in the finical account, future profits made in the uk will be sent to china and will be and outflow of primary income on the current account
Explain the difference between a forward market in currencies and a market for equities?
A foward market for currencies is a finical market where participants can agree to buy or sell a currency at a future date. The truce us aggressed upon at the time of the contract. Curries are units of exchange used to facilitate trade between individuals and countries and are typically issued and backed by government or monetary authorise. They are used to buy and sell goods.
By contrast a market for equities involves the buying and selling of shares in companies Equaties represent a claim to a portion of a company’s assets and profits and their prices can be influenced by a range of factors such as earnings reports and consumer confidence
forward market
A foward market for currencies is a finical market where participants can agree to buy or sell a currency at a future date. The truce us aggressed upon at the time of the contract. Curries are units of exchange used to facilitate trade between individuals and countries and are typically issued and backed by government or monetary authorise. They are used to buy and sell goods.
market for equities
By contrast a market for equities involves the buying and selling of shares in companies Equaties represent a claim to a portion of a company’s assets and profits and their prices can be influenced by a range of factors such as earnings reports and consumer confidence
Explain one way which in the bank of england can reduce the level of moral hazard in finical markets?
Moral hazard us a situation where one party in a transition has an incentive to take excessive risks because the costs of those risk will be borne by some else. The bank of england can issue public statements to signal its concerns about risky behaviours in markets.
