Money and bank Flashcards
what is the monetary policies done by HKMA
only maintain linked exchange rate
no private investment
why the low-interest rate increases the demand for housing
people usually buy property by borrowing money from banks
the low interest rates lower the cost of borrowing money to buy property, thus the demand for housing will increase
Central bank buys government bond from the public
where will the money go
Bank reserves
XXX cash in public circulation
when more shops accept electronic payment, what is the effect of actual banking multiplier
may increase
bank deposit increase
actual reserve ratio may decrease
actual banking multiplier may increase
why use of credit card will increase the actual banking multiplier
use of credit card is the process of borrowing money from bank
so loan increase and actual reserve ratio decrease
what is fully backed up by the US dollar
monetary base
X money supply
why money supply is often larger than monetary base
under the fractional reserve system, banks are required to keep only a fraction of their deposits as reserves. They can create credit by lending out the remaining fraction in the form of loans to business or private individuals, which would eventually find their way back into the banking system in the form of deposit, resulting in a multiple increase in deposits
give one advantage to both MTRC and the customers of using store value tickets
MTRC: less manpower selling ticket so lower cost
customers: less queuing time to buy tickets
explain two functions of money that would be affected in times of inflation
Store of value less purchasing power of the same amount of money Standard of deferred payment the real value of money decreases Medium of exchange the real value of money decreases
explain two difficulties people may encounter when using salt as money
unable to maintain a stable quality
maybe bulky to carry around
may not be scarce enough
different kind of salt may not have uniform quality
why octopus card cannot perform unit of account and standard of deferred payment
it is not a unit of account because the price of other goods are not expressed in terms of Octopus card
It is not a standard of deferred payment because payment is immediately debited to the Octopus card
explain two factors that would affect people choice among choosing which kind of bank deposit
liquidity
returns in terms of interest
certainty in interest earned
name two central bank function performed by HSBC
issuing currency
government banker
functions of central banks
issuing currency
act as the banker and advisor of the government
monitor the monetary sector
act as the lender of last resort
to administer the clearing house
carry out monetary policies
monitor the country’s foreign exchange reserve
why small banks can survive in Hong Kong
close contact with customer
flexible management
provide specialized financial service
better terms offered to customers
