The Financial Sector Flashcards
1
Q
The roles of the financial sector? (5)
A
- Saving
- Lending
- Reducing risk
- Forward market in commodities
- Shares
2
Q
How does the financial market reduce risks?
A
Forward currency markets enable firms to buy foreign currency at a fixed price which gives firms more confidence to invest.
3
Q
Market failures in the financial sector? (5)
A
- Asymmetric information
- Moral hazard
- Speculation and market bubbles
- Market rigging
- Externalities
4
Q
The functions for Central Banks? (5)
A
- Monetary policy
- Banker to the government
- Lender of last resort
- Printing money
- Regulation of banking industry
5
Q
How does the central bank act as the lender of last resort?
A
If the government runs out of money the central bank buys their debt, preventing panic.