Role Of Markets

Question 1

What is money?

Answer 1

Anything generally accepted as a means of payment for goods and services. Consists of notes coins and bank deposits

Question 2

What’s the difference between debit and credit cards?

Answer 2

Debit I Credit
————————————————– ———————————————-‐——-
Takes money directly from account and Enables consumer to buy goods even when no money
transfers it to seller.no money = no products in account if not paid back by certain amount
-no charge to seller of time,charged interst.Retailers charged for these card

Question 3

What is barter‽

Answer 3

Double coincidence of wants .Someone has products you want and is willing to exchange for your goods and services.

Money avoids the need for this.

Question 4

What is Medium of exchange?

Give an exampl3

Answer 4

Anything that sets standard of value of goods and services acceptable to ALL parties in a transaction

Money

Question 5

What is the financial sector?

Answer 5

Consists of financial organisations
and their products
and involves the flow of capital

Question 6

What is the role of the financial sector?

Answer 6

• helps markets to function
• and consumers,firms and governments to carry out economic activities within a regulatory framework

Eg.lending and borrowing‐>allows money to be moved from those who do not need to use it immediately aka savers to those who want one to use it now this allows for good use of all funds since when the offer will meet the demand it has to efficient organisation of the economy

Question 7

What is the role of the central bank?

Answer 7

-issue BANK NOTES🤑💷
-control MONETARY POLICY by SETTING BANK RATE📉📈
‐ provide financial Stability by trying to ensure that UK citizens can trust financial organisations👨‍💼💕
-manages country’s foreign reserves🇯🇪🇭🇲🇯🇲🇭🇲🇸🇩🇰🇷🇮🇹🇮🇳🇧🇪🇧🇭🇩🇪
- acts as Bank for the government🏦🏧⚖

Question 8

What is investment?

Answer 8

Purchase of capital goods that are used

• to produce future goods and services
• also an asset purchase to provide an income in the future

Question 9

What is the rate of interest?

Answer 9

Cost of borrowing and reward for saving

Question 10

What is the BASIC role of commercial banks‽

Answer 10

Takes deposits and turn them in to assets by investing or lending->gain higher interest rate than paid 4 deposits

Question 11

What is/are the role/s of commercial banks?

Answer 11

• accept deposits and pay interest on them
• keep savings safe⛑
• make payments on behalf of consumers thru phone payments, bank transfers 📲💸
• issue loans to individuals and firms on which interest is charged🕴👥🏢
• offer safe deposit boxes for expensive items 🔐🗳💰💎

Question 12

What is a building society?

Answer 12

A mutual financial institution that is owned by its members its primary objectives are to
receive deposits from members and lend money for members to purchase property

Question 13

What is a mortgage?

Answer 13

An agreement with A financial institution to borrow money to purchase a property

Question 14

What is insurance company ?

Answer 14

Financial institution that guarantees compensation per specified loss damage illness or death in return for an agreed premium

Question 15

What are the types of insurance?

Answer 15

LIFE INSURANCE
-aims to pay out money to surviving family if insured person dies (as long as which premiums have been paid)
Intended to help replace loss of income as a result of person insured

GENERAL INSURANCE

• covers all non-life policies includes property,contents, motor, health,pets
• helps individuals deal with unexpected events-spreads risk of loss across all insurance holders

Question 16

IMPORTANCE OF FINANCIAL SECTOR:Credit provision

Answer 16

• without credit provision the level of economic activity would be limited
  Although consumers may run into very large debts,it provides a valuable way to buy now pay later which Increases consumption

-consumers
Provision of mortgages(consumers only pay small % of cost)->gives consumers ability to buy new home

-producers
Borrow from many financial institutions->enables them to grow, without having to save all necessary,money first

-government
Credit enables them to spend when tax revenue has not yet been collected

Question 17

IMPORTANCE OF FINANCIAL SECTOR:Credit provision

Answer 17

• without credit provision the level of economic activity would be limited
  Although consumers may run into very large debts,it provides a valuable way to buy now pay later which Increases consumption

-consumers
Provision of mortgages(consumers only pay small % of cost)->gives consumers ability to buy new home

-producers
Borrow from many financial institutions->enables them to grow, without having to save all necessary,money first

-government
Credit enables them to spend when tax revenue has not yet been collected

Question 18

IMPORTANCE OF FINANCIAL SECTOR:Liquidity Provision

Answer 18

Liquidity-how easy it is to turn asset into cash 🍷
Banks are the main providers of Liquidity to households and businesses –>allows them to continue to function when faces w unexpected demands 4 cash

They DO THIS BY:offering overdraft facilities

Question 19

IMPORTANCE OF FINANCIAL SECTOR:Risk management

Answer 19

Financial institutions allow both individuals and businesses to pool their risks from exposure to Financial markets

FOR EXAMPLE
Finance manager could take savings from a range of customers and invest money in a range of different companies so that if one does less well the savers do not lose all their money as others may be doing better.While iF it is more risky in one firm on stock exchange which may fail

Question 20

Analyse how diff interest rates affect:

• borrowing
• saving
• investment

Answer 20

https://docs.google.com/document/d/1iWID0D7pPuFhclIfSlxF-SofcqiVNHwgvbZSJua4iOc/edit?usp=drivesdk

Question 21

Analyse how diff interest rates affect:

• borrowing
• saving
• investment

Answer 21

https://docs.google.com/document/d/1iWID0D7pPuFhclIfSlxF-SofcqiVNHwgvbZSJua4iOc/edit?usp=drivesdk