Module 18 - Money and interest rates

Question 1

Describe the functions of money

Answer 1

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Question 2

Monetary financial institutions

Answer 2

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Question 3

Retail banking

Answer 3

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Question 4

Wholesale banking

Answer 4

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Question 5

Financial instruments

Answer 5

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Question 6

Liabilities

Answer 6

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Question 7

Sight deposits

Answer 7

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Question 8

Time deposits

Answer 8

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Question 9

Sale and repurchase agreements

Answer 9

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Question 10

Certificates of deposit

Answer 10

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Question 11

Gearing (or leverage)

Answer 11

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Question 12

Assets

Answer 12

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Question 13

Market loans

Answer 13

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Question 14

Bills of exchange

Answer 14

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Question 15

Treasury bills

Answer 15

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Question 16

Reverse repos

Answer 16

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Question 17

Maturity gap

Answer 17

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Question 18

Liquidity

Answer 18

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Question 19

Liquidity ratio

Answer 19

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Question 20

Sub-prime debt

Answer 20

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Question 21

Capital adequacy ratio

Answer 21

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Question 22

Secondary marketing

Answer 22

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Question 23

Securitisation

Answer 23

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Question 24

Special purpose vehicle (SPV)

Answer 24

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Question 25

Collateralised debt obligations

Answer 25

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Question 26

Co-ordination failure

Answer 26

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Question 27

Global systematically important banks (G-SIBs)

Answer 27

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Question 28

Macro-prudential regulation

Answer 28

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Question 29

Lender of last resort

Answer 29

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Question 30

Prudential control

Answer 30

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Question 31

Open market operations

Answer 31

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Question 32

Exchange equalisation account

Answer 32

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Question 33

Money market

Answer 33

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Question 34

Discount market

Answer 34

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Question 35

Rediscounting

Answer 35

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Question 36

Describe the functions of banks

Answer 36

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Question 37

Describe the liabilities and assets of retail banks

Answer 37

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Question 38

Explain the conflict between liquidity and profitability

Answer 38

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Question 39

Explain what is meant by capital adequacy and why it is important

Answer 39

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Question 40

Explain how secondary marketing can reconcile the conflicting objectives of liquidity and profitability

Answer 40

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Question 41

Explain the process of securitisation

Answer 41

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Question 42

Discuss the effects of securitisation

Answer 42

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Question 43

Explain the reasons for the financial crisis of 2008

Answer 43

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Question 44

Give examples of regulations introduced in response of the financial crisis

Answer 44

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Question 45

Describe the functions of the central bank

Answer 45

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Question 46

Describe the operation of the money market

Answer 46

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Question 47

Explain the ways in which the central bank can increase the liquidity of the banking system

Answer 47

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Question 48

Monetary base

Answer 48

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Question 49

Broad money

Answer 49

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Question 50

Bank multiplier

Answer 50

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Question 51

Money multiplier

Answer 51

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Question 52

Non-bank private sector

Answer 52

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Question 53

Quantitative easing (QE)

Answer 53

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Question 54

Financial instability hypothesis

Answer 54

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Question 55

Exogenous money supply

Answer 55

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Question 56

Endogenous money supply

Answer 56

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Question 57

Explain the credit creation process in theory

Answer 57

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Question 58

Explain the five main ways in which a change in the money supply could arise

Answer 58

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Question 59

Describe the three main motives for holding money

Answer 59

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Question 60

Discuss the five main factors affecting the demand for money

Answer 60

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Question 61

Explain the effect on interest rates of a change in the supply of money

Answer 61

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Question 62

Explain the effect on interest rates of a change in the demand for money

Answer 62

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Question 63

Equation of exchange

Answer 63

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Question 64

Velocity of circulation

Answer 64

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Question 65

Describe the effect of an increase in the money supply on the exchange rate and the balance of payments

Answer 65

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Question 66

State and describe the equation of exchange

Answer 66

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Question 67

Describe the effect of a change in the money supply on output and prices

Answer 67

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Question 68

Explain the transmission mechanisms that translate a change in the money supply to a change in GDP

Answer 68

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Question 69

Discuss the strengths of the links in the monetary transmission mechanisms

Answer 69

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