Q3: Quiz #2 (Chapters 13-15) Flashcards
Explain the two roles in the financial system (Borrower, and saver)
Saver: People who don’t directly need money yet, they lend their money to the borrower with an interest rate
Borrower: People who are in need of money they take loans from the savers with an interest rate
What connects both the Borrower and the saver?
The Financial Market
Explain a bank run
A rare occurence, a run is when everyone tries to withdraw their money from the bank.
Does the BSP give all your money back in a rare event of a bank run?
No, the BSP will only compensate up to 500 thousand pesos.
What are the 6 types of banks?
Universal
Commercial
Thrift
Rural
Coorparative
Islamic
What was the first thing people used before money was created?
People traded goods and services before money was created.
What was the problem with trading goods and services?
People needed to have the same wants.
Unable to calculate the profits
How was paper money developed?
The inconvenience of bringing heavy metal/gold led to the invention of paper money, where in which the paper money can be exchanged back to the gold.
What exactly is the monetary policy
The monetary policy is the amount of money that is circulating around the economy at a certain time.
Explain to me the money multiplier
The money multiplier transforms the small amount of money into a bigger amount of money for someone to loan.
What is the reserve deposit ratio?
When you deposit money into the bank, the bank will only keep 10% of your money, the rest is loaned away. When you need your money back, you’ll get it back.
What is a monetary policy wherein it increases the money supply?
Expansionary Monetary Policy
What are the tools for controlling the money supply?
Reserve Requirements: The bank only has to keep a certain percentage of your money, and the less they are free to lend out.
Discount Rate: When the bank doesn’t have enough money, they can borrow money from the BSP with an interest rate.
Open-market operations: When the government wants less money floating around, it sells their bonds if they want more money floating around, its vice-versa
What is the fiscal policy?
It’s how the government manages the spending of the economy.
What are the direct taxes?
Personal and Business Income Tax
Property Tax
Estate Tax
Gift or Donor’s tax
