Theme4.3

Question 1

Role of financial markets

Answer 1

To facilitate saving
To lend to businesses and individuals
To facilitate the exchange of goods and services
To provide forward markets in commodities and contracts
To provide a market for equities

Question 2

Market failures in financial sector

Answer 2

Asymmetric information
Moral hazard
Speculation and market bubbles
Externalities
Market rigging

Question 3

Role of central banks

Answer 3

Implementation of monetary policy
Banker to government
Banker to banks - lender of last resort
Role of regulation in the banking industry