Macro-economic environment and impact in asset classes

Question 1

Trends in Investment Market

Answer 1

• Interest rates and currencies
• business and competition
• economic cycles and inflation

Question 2

Fiscal Policy

Answer 2

Use Government spending and taxation to influence the economy

In recession? increase government spending or cut taxation

In boom? do the opposite!

Question 3

Monetary Policy

Answer 3

Control interest rates and supply of money to manage economy.

Question 4

M0

Answer 4

• Narrow money
• an indicator of consumer spending an retail sales.
• Growth means spending is buoyant
• Contraction means consumers are cautious

Reflect the cycle but does not influence it

Question 5

M4

Answer 5

• Broad Money
• includes deposits created by banks through their lending activities and deposits for savings by individuals
• Demand for loans means faster growth of M4 and a sign that inflation pressure is increasing
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