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3- Economics- Macro > Monetary Policy And Financial Markets > Flashcards

Monetary Policy And Financial Markets Flashcards

1
Q

Monetary policu

A

Involves controlling macroecon by changes in monetary variables such as the money supply or interest rates
Usually first line of defence
Easy to implement- meeting mpc

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2
Q

mpc

A

Monetary policy comm of boe
Changed 1997- blair moved as believed policticians were using monetary policy for political gain

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3
Q

How does monetary policy work- interest rates

A

Aims to influence ad
Mpc sets interest rate that it pays commercial banks on their deposits held at bofe and rate it charges for short term loan to some conmercial banks or financial institutions
Sets bank rate

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4
Q

Bank rate

A

Sets benchmark for all other interest rates charged throughout banking system in uk
Chanes in interest rates influence ad via transmission mechanism of monetary policy

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5
Q

Time lags

A

May occur 6months-2y before full effect of monetary policy will have it simpact on whole econ

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6
Q

Interest rates for otheer banks/financial organisations

A

Depends on lenth of loan and level of risk
Variety of interest rates paid to savers depends of sums if money deposits and ease of access
Move in same direction as bank rate

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7
Q

Impact of interest rates changes on consumption

A

Increase interest rates, increase cost borrwing
Consumer borrowing to finance consumer spending on consumer durables- cars, furnaiture, falls
Demand personal loans falls- consumers likely to spend less on their credit cards esp with v high interest - atleast 20%
Encourages to save more- increased return
Discretionary income fall as money repayment on mortages increases
Additionally cost of mortgages increases, reduces demand for homes, house prices may fall or rise more slowly, consumer feel less wealthy
Mortgage equity withdrawal likely to fall- mew- consumers finance spending by increasing size of mortgage
Vakue of shares on stock market likely to fall when interest rates rises- less borrow less spend less rev more cost repay loans, less dividens, decrease demand, decrease price
Wealth effect
Decrease consumer conifdeence- about future earnings or job security so less likely to spend

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8
Q

Impact of increase interest rates on investment

A

Business investment in new capital fall as interests rates increase
As borrowing to fund capital expendaiture increases in cost
Business confidence in future demand falls, decreasing investment (in new plants, mahinery, computers, new buildings, infrastructure)

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9
Q

Impact of rise in interest rates- exports

A

Increase interest rates increase exchange rates, decrease demand exports
Foriegn take adv of high interest rates and deposit cash with uk banks- increase demand for sterling as hot money flows
Demand for imports inelastic, exports elastic

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10
Q

Impact of increasing interest rates on as

A

Long term increading interest ratess may damage the supply side of the economy by increasing cost of borrowing
Firms find more diff to invest in new capital and r&d- damage competitive adv over time
Economists argue that uncertainity caused by accelerating inflation even more damage ot supply side of econ in lr

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11
Q

Eval effectiveness of monetary policu

A

Main objective of mpc is to keep cpi inflation at 2% give or take 1%- aim to promote macroecon stability
If mpc failes to keep cpi inflation at 2% gov of boe must explain why and aim to do
But blunt insturment with cost push (more effective demand pull)
Not effective at raising ad when econ stuck in recession and confidence low- instead use qe

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12
Q

Recent examples of cost push inflation

A

Ukraine 2022- oiil and grain
Credit crunch- 5.2% yet boe not increase interest rates as did not push econ into even deeper neg output gap- make recession worse

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13
Q

Paradox of thrift

A

Save rather spend
Job security- as firms cut costs as decrease ad- cut loan spending
Made redundant- cant sepnd as cannot borrow
Wealth effect assests, stocks and porpoerty decrease value

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14
Q

Money supply

A

Total q of money circulating in the econ

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15
Q

Narrow money

A

Notes and coins in circulation plus balances in instant access bank accounts such as current accounts
M0

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16
Q

Broad money

A

Cash deposited in bank accounts and building society accounts to which savers donet have instant access
Money is held in accounts which notice is required to make withdrawal eg, savings account
M4

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17
Q

Expansionary monetary policy

A

When interest rates are low, borrowing should rise and money supply and ad too
Boosting econ growth

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18
Q

Contractionary monetary policy

A

Interest rates high, borrowing should fall, money supply and ad fall, decrease inflationary pressure

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19
Q

Monetary policy 1979-1992

A

Con tried control money supply itself by setting targets for monetary growth- stratgey v unreliable and often resulted in sharp swing in interest rates

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20
Q

1992 onwards monetary policy

A

Preferred startegy has been to use changes in repo/bank rate
Sets benchmark for short term interest rates throughout the econ

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21
Q

Since 1997 monetary poliuc

A

Monetary policu removed from control of poitics and set by mpc of boe

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22
Q

Exchange rate

A

Price of one currency in terms of another currency
May be fized or allowed to float

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23
Q

Floating exchange rate

A

Exchange rate depends on demand supply conditions
Pound since left erm

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24
Q

Fixed exchange rate

A

Eg erm

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25
Q

Hot money

A

Flows of cash for short term investment purposes
Can be invested in money markets around world for as little as 24h

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26
Q

appreciation of currency

A

High interest rates
Encourage hot money flows or short term flows from abroad into banking sector- take adv high interest rates
Increase demand currency, appreciation

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27
Q

depreciation of currency

A

Low interest rates or speculation of a fall in interest rates
Hot money to leave country in search of higher interest rates elsewhere
Decrease demand for th ecurrency- depreciation

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28
Q

Link between pound and trade

A

Spiced
Strong pound imports cheap exports dear

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29
Q

adv strong pound

A

Cheaper imports for consumers- less sterling used to pay for imports
Lower production costs- uk imports many basic commodities raw materials so decrease cost push inflationary pressures
Lower inflation decrease cost push- domestic suppliers face stiffer competition from cheap imports-less likely to increase prices

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30
Q

Disafv strong pound

A

Increased deficit on current account of boe- make exports more expensive and imports cheaper
Where demand elastic, likely to import more and export less
Decrease econ growth exprots fall, reduction ad and reduce econ growth rate- may reduce employment rate and living standards esp in regions where industries dependent on export makret- eg car manufacturing industry- storng exchang rrate caused closure of many uk industries in 80s and 90s especiallly textiles, clothing, semi conductor production
Negative impact on business confidence and capital investment- as investment dependent on strength fo demand- so less exports decrease willingness to invest

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31
Q

Adv weak pound

A

Increased demand for exports, decrese deficit on current account - if demand exports price elastic, eg high value added luxury goods such as land rovers and bmw minis
High cost of imports decrease demand where demand elastic- manufactured goods- decrease deficit bop
Exports injection circulr flow of income- provided net injectections greater than net withdrawls- positive multpplier effect- boost gdp and create more jobs- econ growth increase, increase tax rev, decrease welfare costs increaisng equity
Higher demand exports may boost business confidence, encourage net investment, further boost econ growth

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32
Q

Disadv weak pound

A

Cost push inflation likely to hit uk due to high mpm- raw material sand oil- creates greater uncertainity and undermine beneifts of export led growth
Increases cost of exports/manufacured goods

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33
Q

Money

A

A medium of exchange
An asset accepted in echange for goods and services rather than having to resort to barter

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34
Q

functions of money

A

Store of wealth
Unit of account/measure of value
Standard of deffered payment

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35
Q

Money- store of wealth

A

Cash convenient store of purchaisng power
Asset universally accepted means of payment for goods and services- medium of exchange

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36
Q

Unit of account/measure of value

A

Money provdies means of expressing value, allows people to compare relational values of g and s
Price signalling mechanism

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37
Q

Standard of deffered payment

A

In developed ecoomies goods frequently purchased on credit with amount repaid in futuyre
Allwos delay payment for goods or settling debates as can be reasonably confident about futrure alue and pruchasin power of money

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38
Q

Iiquity

A

Ddegree to which financial assets can be easily converted into money

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39
Q

Money suply equation

A

Money supply x velocity = price level x gdp= m=p

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40
Q

Demand for money dictated by

A

Income- higher level of income, grater demand for money in order to facilitate spending
Rate of interest- higher rate of interest, higher opp cost of holding money in cash fofrm or in current acount that does not pay interest

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41
Q

Money supplyu increases seen on diagram

A

Shift right
Decrease rate of interest

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42
Q

Demand for money increases on diagram

A

Upwards shfit or right shift of demand curve, interest rates likely to increase

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43
Q

Nominal interest rate

A

Interest rates not adjusted for inflation

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44
Q

Credit crunch

A

Reduced wilingness of financial institutions to lend to households, busienss and to one another

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45
Q

Real interest rates

A

Nominal rate of interest minus rate of inflation

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46
Q

Problem with barter

A

V inefficient and impractical require double incidence of wants
Inefficent- time and energy spend securing markets
Limit developmenyt o f specialisations, if tradin inefficient, division of labour, lagre scale production leading to econoies of scale

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47
Q

Asset

A

Something of value
May be savings deposit for idivid- gain interest
But or bank this would be a liability, bank has to pay interest on deposit and honour withdrawals from account

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48
Q

Liability

A

Legal debt, legal obligation to pay at some point future debt
If lends out cash deposuted with the bank in a 3rd party in return for interetspayments-0 creates asset0 interest earning use of funds
Liability for lender

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49
Q

Debt

A

Money owed and is a libaility

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50
Q

Net worth of a bank=

A

Assets - liabilities

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51
Q

Money markets

A

Primarilty used for trading of short dtaes financial assets eg cash, st loans, trade in shrt dated bonds about to mat7rue
Short dated bonds (treasury bills and commercial bills) considered to be highly liquid assets and can be easily traded for cash
Banks trade on money market and money lent for 24hr to 1yr

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52
Q

Lond intermank market

A

Important operation of uk monetary policu
Banks lending to each other

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53
Q

LIBOR

A

London interbank offered rate
Rate of interest charged when banks lend to each other on lim
Gov raise finance on money markets- trasurey bills sold to raise st finance for gov cash flow purposes

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54
Q

Capital markets

A

Used by plc and gov raise funds lt

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55
Q

Primary markets

A

New shares plc sold as a result of stock market flotations and noew corporate.gov bonds may be issued
Inititial selling of shares

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56
Q

Secondary markets

A

Second hand shares and bonds
London stock exchange and alternative investment market

57
Q

equity

A

Wealth

58
Q

Shares

A

Equities
Shareholders part owners of company, dont mature, expect to recieve share of profits as a dividend 1-2x yr
Plc shares sold on stock ecchange

59
Q

Negative equities

A

Value of home less than mortagege

60
Q

Market price of bonds=

A

Coupon/yield. X 100

61
Q

Yielf

A

Real rate of inetrest on bond
Amount coupon as % of market price

62
Q

Coupon

A

Nominal rate of payment
Annual amount payed

63
Q

Relationship between prices of bonds and yields

A

Inverse
Bonds mature at issue price- redeemed for cash
Uields on bond set benchmark for interest rates in money market- if yields increase , interest rates increase
Bond prices rise, yield fall

64
Q

Commercial/retail banks

A

Financial institution which aims to make profits by selling banking services to its customers
Barclays

65
Q

Investment banks

A

Porvide financial advisory services to large firms, advising private companies on stock market floatation
Also deal directly in financial markets for own accounnt- only trade with own money of shareholders
Dont deal with general public
Jp morgan chase

66
Q

Insurance companies

A

Financial protection against losses in return regular payment
May use cash surplus to speculate on financial makrets
Pool client risk-assume not every client claim
Eg legal and general

67
Q

Pension funds

A

Offer social insurance by providng income to the insured persons following their retirement/savings funds for workers
Speculate with this money
Eg aviva

68
Q

Hedge funds

A

Wealth management srrvices, savings clubs for the wealthy
Specultae on behalf of deposits, take % return and charg efee
Tighly regulated so not to general public

69
Q

Private equity funds

A

Purchase equities in other companies, often invest own funds
Usually partnership or plc
Not open to public
Eg boots used to be plc but now private equity

70
Q

Investment trusts

A

Pools funds of its shareholders and invests in diversified portfolio of services
Plc anybody buy shares in them
Takes shareholders money and invests other schemes

71
Q

Unit trust

A

Mutual funds that pass profits directyly to investors rather than reinvest- fund
Fund manager directly invests of unit trust, investors in benefactory of unit fund
Oublic buy units in them

72
Q

Building society

A

Financial instititions which pays interest on investmets by its members and lends capital for production or imporvement of houses
Prvide mortsgae
Eg nationwide
Members are savers
Dont borrow/lend on interbank lending market- safer

73
Q

Mutual societies

A

Financial organisation esp a building socitey in which the poliuc holders share the profits and expenses and there are no shareholders
Savings club ordinary people
Provide limited range financial services- savings and loan
Eg co-op

74
Q

Main function of boe

A

Help gov achieve macroecon stability
Implement monetary poliuc
Maintain financial stability
Government bank

75
Q

How boe helps gov achieve macroecon stability

A

Keep inflation low and stable
Sustainable growth adn low unemployment focus since credit crunch
May intervene foriegn exchange markets- buy and sell foreign current to try to influence exchange rate- maintain stability that encourgaes interentational trade
International financial stability-boe liase with othee rcentral banks around the world- eg imf

76
Q

boe maintain financial stablity

A

Acts as lender of last resort- to operate in uk banjs must maintain account/deposut with boe
In st- bankks maintain liquidity by borriwng from emach other
If insufficient liquidity in money markets- baks can use deposits central bank to borow boe
Lender of last resort is a standard function of central banks worldwide- aim to prevent systematic critiss- lack of confidence, collapse if urn on the banks- northern rock

77
Q

Boe as gov bank

A

Collects tax rev and distributes to various gov dpt to cover gov spending
Since 1998 debt management office (rather than boe) issues gov bonds to cover gov borrowing requirements
Treasury bills- short dated gov bonds- 3 months standard
Long dated gov bonds up to 25y

78
Q

Systematic risk

A

If one bank fails it wil drag down other banks with it
Due to interban lending market, if one fails cant pay back lonas to other banks

79
Q

Credit multiplier

A

How much the money supply i ncreases if bank deposit/monetary base increases

80
Q

How credit is made

A

When a bank creates a loan, it creates creidt
More credit banks create- lagrer money supply
Loan results in creation of an advance of money
Recorded as an asset on banks balance sheet- as loan creates interest
Bank also creates a deposit equal to value of the loan, recorded as liability0- double entry system

81
Q

Process of credit multiplier

A

Banks keep fraction deposit to meet reserve requirement
Custermary for banks to pay each other, not by withdraw cash, use deposits
Banks work on assumption that not all consuemrs are likely to require cash at the same time
Only retain cash requirements as resevre ratio

82
Q

Multiplier equaltion

A

1/bank reserve (as decimal_

83
Q

Total bank deposit equation

A

Initial deposit/bank reserve (deposit)

84
Q

Order of liquity assets

A

Cash
Balances boe
Mmoney at short call
Bills- commercial and treasury
Investment- gilts and coperat ebonds
Advances- credit or loans exteneded to consumer

85
Q

Balances at boe

A

In order to operate in uk, all banks must have an account at boe which can trun to when short fo cash

86
Q

Money at short call

A

Money borrowed from other banks via interbank lending market
Has to be paid back immediately when lender demands

87
Q

Bills

A

Commercial and treasury bills- max 3 months
Short term borrow on money amrkets as near maturity

88
Q

Gov bonds/gilts

A

Debt secuirty issued by a gov to support gov spending
Often considered to be low risk as issuing gov backs them
Can pay periodic interest payments caled capital payments
Lonng dated
On stock markket

89
Q

Corporate bonds

A

Debt secruity issued by a company to increase capital
Relatievly liquid but less so than gov bonds

90
Q

Secured loans

A

Businesses or personal loans that require some type of collatoral as condition of borrwoing- against asset owner esp if credit score low
Eg mortagage, hire purchase scheme with car

91
Q

mortgages

A

Legal agreement by which a financial institution lends money with invterest to hlep individ firm pay for property
Low liqidity as paid over long period of time

92
Q

Unsecured loans

A

Loan doesnt require any type of collatoral
Eg credit cards
Least liquid as higher defalt rate, higehrst interest rates

93
Q

Financial regulation

A

Imposing ruels and regulations on banks and other financial institutions thus limiting their freedom to operate as they may wish
Eg. Conusmer credit act under 18 cant lend/credit card, over 18 cooling off period

94
Q

Trade off between regulation and profitability

A

Too much deregulation- cuase risky behvaour, put profts before financial security- increse systematic risk to creidt crunch- many banks bailed out by gov therefore tax payers- prevent complete ollapse of econ capitalist system in econ

95
Q

History of regulation- thatcher

A

1985 deregulated much of financial industry as part of porgramme of supply side polces
Coincide with big bang- london stock ecahneg privatised, computarised trading in secuirties, many financial institutions privatised to be banks
Eg northern rock later taken into state control

96
Q

Labour 1997 regulation

A

Created financial services authorityt
Boe act 1998- mpc created
2001- power to regulate and supervise banks to fsa- self regulate, banks gave freedom to determine own cash/liquidity ratios, before set by bofe
Led to global banks open in london eg lehman brothers financial boom created

97
Q

Lead up to credit crunch- regulation

A

Low liqiodity ratios below 5% led to increasing risky lending
Invest in risky assets- derviatives- subprime usa- syggesteed many managrs in banks and fsa didnt undertsnad complex financial products
Fsa- Assymetrical info- exploit consumer with pressurised sales techniques, missold complex financial producs- ppi and inerest hedge products
Systematic risk increase as credit default swaps

98
Q

Consequences of pre credit crucnh boom

A

Employment increase- new officers- traaders and builders
Tax rev increase- icome tax, coperate tax, capital gains tax
Fdi increase, foriegn banks set up, hot money flows increase, interest lending market
Credit multiplier increase as reserve ratio self determined, increase money suppluy
Financial account balnce - increase fdi and hot money flows
Current account- wea;thier individ spend on imports
House prices as increased demand

99
Q

Fsa — what happened

A

Abolished 2013 as failed to sport risky policy in lending- credit crunch

100
Q

Financial policu comm

A

Boe
Identify, monitor and take action to remove or reduce systematic risk with prietction and enhance resilience of uk financial sysetem
Support econ policy of gov
Macroprudential regulation- prevent oo much risky interbank lending market

101
Q

Prudential regulation authority

A

Of boe
Pra
Micro prudential regulation- supervisory identiyf and motinor and manage risks of individ firms to maintain stability
May set specific capital and liquid ratio to avoid disruption to essential financial services of individ firm f- carry out stress tests

102
Q

Financial conduct authority

A

Not boe yet acountable to gov
Protect consumers from market failre- assymetirci info and exploitation- ppi and interest rate hedging
Proetct financial makrets to enhance interests of finanical system uk
Promoto efffective competiion in interests of consumers

103
Q

Ppi

A

Loan protection if not pay back, not needed
Pressurised sales tactis used, banks face huge fines

104
Q

Interest rate hedging product

A

Sold to small businesses- led to collaspe
Insurance against icnreases in interest rtae0 expoosuensive

105
Q

How may a bank faill

A

Lack of capital (sharehlder funds inc retained profiits)- if value of assets less liabilities- insolvent, bankrupt
Insufficient liquidity0 bank vulnerable to run on the bank een if assests with liability0 bank cannot turn assets into cash to quickly meet demands of consumers
If unexpected high demand for capital- borrow form other banks or boe

106
Q

Moral hazard created by boe

A

Incentive for banks to lend out too much and maintain insufficient capital/liquid ratios in knowlegde can turn to lender of last resort
Banks too big to fail- boe or gov help fund
If banks fail- stop lend to consumer and businesses, depositers loose savings, decrease ad, colapse econ

107
Q

Vickers report

A

More robust measures introduced
Impose firewalls between retail and investment banks arms of banks
Ensure risky parts of bank wont impact provision of retail bank

108
Q

Liquidity ratio

A

Fraction of a banks assets held in liquid assets as cahs deposited in boe, money at short cal, short dated commercial bonds
Liquid assets dont earn much profut for businesses but allow the bank to meet it scustomers demand for cash quickly - borrow cheap interbanjk marketm lend long with higher rate of interest
Temptation of banks to keep liquidity level to minimum

109
Q

Capital ratio

A

Amount of capital- shaperholders and retaiend profit on a banks balance sheet as a proportion of its loans
Capital ratio strong indicator of banks financial health, if value bank asset fall- vulnerable to be insolvent

110
Q

Quantitive controls

A

Max limit amount bank lending
Project merlin set trgets for retail bank lending small and medium sized banks

111
Q

Qualitative controls

A

Persuade banks only lend to certain types of customers
Project merlin- small and medium over consumer 0encourage net investment and real econ growth

112
Q

Open market operations

A

Qe

113
Q

Forward guidence

A

Announcing in advance what boe plans to do with interest rates and the money supply
Purpose is to icnrease confidence in boe ability to minatin price stability and thus decrease expectation fo inflation or deflation

114
Q

Mpc when forecasting take into account

A

Financial markets- share prices, indictaor investor confience, determine household wealth and consumer confidence
International econ- inc recent macroecon develipments in us, trends pound exchange rate against euro or dollar, cost push inflation (weaker pound)
Money and credit- bank lending and consumer credit figures willl be analysed in clevels of mortgage equity withdrawals (mew)- and unsercured loans, movements m0 and m4
Demand and output- consumption and planned investments figures, rate of growth of real gdp along with estinates of size of output gap with also be considered
Labour market- figures for employment and unemploymentg will be presented, data can be clear indicator of demand pull and cost push- high wage settings- may feed increased consumer prices
Costs and prices- manufacture inport costs and factoryt gate prices are used as an indictator of whether firms are passing inflation along process to high st- cost push

115
Q

Problems with accurately forecasting inflation

A

Eg consumer price index constant errors and omissions
External shocks- natural disaster, war- make innaccurate
Boe quaterly inflation report produces a fan chart with banks central forecase with paired bands of probability of inflation falling win certain ranges

116
Q

Name characteristics of money

A

Durable
Hard to counterfiet
Accepted by the population

117
Q

An economys money supply can be defined as the entire stock at a particular time

A

Currency and other liquid instruments circulating in an econ

118
Q

There is an inverse relationship between market interest rates and bond prices
As interest rates rise the price of existing bonds will fall- this is in order to

A

Increase the percentage yield on the bond to match the higher market interest rate

119
Q

Investment bank- definition on test

A

A financial institution that ensures the availability of capital for firms, gov and other entities

120
Q

There is a conflict between a commercial banks objectives of profitability and of liquidity because generally

A

Liquid assets yield a lower rate of return than those which are more illiquid

121
Q

Current gov plans to deregulate

A

Edinburgh reforms
Believed caused a brain drain and has limited the growth of the financial services sector in the uk

122
Q

Financial markets intro

A

Financial markets are where a wide range of financial assets such as equities (shares in plcs) debt obligations, currencies and future contraccts for commodities are traded
Financial markets are important to encourage saving and investment that ultimately lead to econ growth
Markets are regulated to mitigate agianst market failure such as asymmetric info

123
Q

Regulation of financial markets conc

A

Regulation of financial markets is vital to foster macroecon stability, but financial markets are not the only source of instability, supply side shocks, accelerating inflation and reckless fiscal policy could also cause macroecon instability, thus there is also a role for the mpc and obr in promoting macroecon stability

124
Q

Financial account

A

Records financial flows for investment prupsoes
Hot money/st money flows
Lt money flows

125
Q

Hoot money flows

A

Mainly speculation crucially dependent upon expectations of currency movement and interest rates in competing financial sectors

126
Q

Lt money flows

A

Investment and saving
Fdi- microsoft research centre in cambs
Purchase production factioiity malaysia for dyson- expand productive capacity
Protfolio investment- noty productive capacity- buy buinsess shares, rmeoval of exchange controls , cocacola decided to purchase majority sharholding in costa

127
Q

Pro- growth international capital flows

A

International capital flos finances and promites grotwh world trade
Source finance for firms that would otehrwise not able obtain financie within
Fdi transfer of tech-supply side

128
Q

Cons growth of international capitla flows

A

Greater financial interdependence- more vulnerable
Fdi- increase dominance multinational- global oligoplies possile exploitation
Large scale e hot money flows of funds between currency can destable er and bop
Loss nat soveriegn=- singgle currency no mp, fiscal vat. Capital tax persistenlyt low to prevent flight

129
Q

Why uk strong pound 1990s to 2008

A

High interest rates as econ doing so well
Imports cheaper increaing demand, deficit bop

130
Q

Factors depedcuate pound after 2008

A

Interest rates cut and remianed low
Loss fdi= brexit

131
Q

Net property income in recent years

A

Defict more uk firms forien owned=— nultinat

132
Q

Implications of brexit on financial services sector

A

Lost eurobind dtrading- gov bonds issuesd europe
Tried get back more market- edinburgh reforms, hunt remove bankers bonuses which quarteng suggest

133
Q

How changes to the bank rate impact the housing market

A

Increase cost investment building new houses- supply fall
Increases cost mortgage- decrease consumer spending and willingness to buy house
Increases cost renting - landlords face higher costs on buy to let mortages so may increase rents
Increases demand renting- due to high cost of mortageges

134
Q

How a housing boom may lead to inflation

A

A housing market boom may lead to higher consumption as a result of the positive wealth effect
Ad push into positive output gap

135
Q

Loose monetary policy

A

Interest rates are too low or qe used to excessively

136
Q

Impact of inflation on diff econ groups

A

Worse for lower income groups- as spend greater % of income on food and energy biklls
May lead to wage price inflationary spirals

137
Q

Profit resulting in inflation

A

Mann- in mpc- raised issue of corporate profit and exploitation of conusmers as cause of higehr prfits
Tombs- supermarkets appear to have widened dtheir margins

138
Q

Population with mortageg

A

2019- 37.5%

139
Q

Price gouging

A

Increasing prices of g s to a levl much higher than is considered sutrified based on teh cost of production
Usually occurs after demand oro supply shock

3- Economics- Macro (21 decks)

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