kt 8

Question 1

Monetary Policy

Answer 1

Manipulation of interest rates to achieve macro-economic
goals

Question 2

Mortgage

Answer 2

Loan to buy a property

Question 3

Negative Equity

Answer 3

Situation where the value of one’s house is lower than the
outstanding debt to the mortgage lender

Question 4

Exchange Rate
(ER)

Answer 4

The price of one currency in terms of another (e.g. £1 = $2)

Question 5

Interest Rate (r)

Answer 5

The price of liquidity (money in a spendable form e.g. bank
deposits or cash)

Question 6

Disposable
Income
(Yd)

Answer 6

Household income after subtracting direct taxes (income
tax and national insurance contributions) & adding
government benefit payments

Question 7

Liquidity

Answer 7

The ease or speed with which an asset can be turned into
spendable form (i.e. money) without loss of value

Question 8

Money Supply

Answer 8

The total stock of liquid assets in an economy at a point in
time

Question 9

Narrow Money

Answer 9

The stock of cash (notes and coin) in circulation or held
by banks and the central bank

Question 10

Broad Money

Answer 10

The stock of all assets that are considered liquid enough
to act as generally acceptable means of exchange i.e.
cash plus bank savings account deposits

Question 11

Bonds

Answer 11

A bond is any asset that promises to pay a certain sum at
a future date; issuers are keen to raise cash today (e.g.
government may need to pay pensions, companies may
want to invest to expand their operation) and will sell at
discount to those who wish to earn a return on their
savings

Question 12

Yield
(on Financial Assets)

Answer 12

The income return on an investment, expressed annually
as a percentage based on the investment outlay