Topic 1

Question 1

What does money need in order to be affective?

Answer 1

Sufficient, acceptable, divisible into small units, portable,acts as a store value

Question 2

What is intermediation?

Answer 2

Banks or building societies

Question 3

What is disintermediation

Answer 3

Going direct or crowdfunding (asking for funds)

Question 4

Reason why we need intermediaries

Answer 4

Location
Aggregation
Maturity transformation
Risk transformation

Question 5

BOE functions

Answer 5

Issuer of banknotes
Banker to the government
Banker of the bank’s
Supervises the economy

Question 6

How many times does the MPC meet a year?

Answer 6

8 times

Question 7

Debt management office

Answer 7

Issuer of GILTS
Replaced BOE to avoid conflict of interest

Question 8

Proprietary organisation

Answer 8

Owned by shareholders

Question 9

Mutual organisations

Answer 9

Building societies, credit unions
Owned by their members

Question 10

Demutualisation

Answer 10

Building societies turn into banks

Question 11

What are credit unions?

Answer 11

Mutual organisations
Regulated by FCA
Covered by life assurance

Question 12

Retail banking

Answer 12

Individuals, small companies

Question 13

Wholesale banking

Answer 13

Large companies
Riskier
Normally used by banks

Question 14

Libor?

Answer 14

London interbank rate of interest.
Acting as reference rate for most corporate lending.

Question 15

Sonia

Answer 15

Replaced Libor due to the libor scandal in 2012.
Sterling over night index average
-based on actual transactions overnight from banks