Topic 2 Flashcards
Macroeconomic objectives
National and world economy:
Price stability
Low unemployment
Balance of payments
Satisfactory economic growth
Microeconomie
Local view of the economy
Definitions
Inflation- sustained increase of price of goods and services
Disinflation - falling inflation
Deflation- sustained period of prices falling below previous levels
CPI- consumer price index
Target inflation?
Between 1-3%
Economic activity
Recovery and expansion: interest and inflation low. Pushes prices up
Boom: to prevent economy from overheating. BOE puts prices up and dampen inflation
Contraction or slowdown: spending falls, demand falls, unemployment rises, inflation slows down
Recession: Boe reduces interest rates. On path of recovery
What is monetary policy?
Process by which the government,central bank or monetary authority controls supply of money, availability and interest
Base rate
Determines the economy. Economy is controlled by interest rates
Fiscal policy
Budget which is normally held in autumn.
Types of budget in economy
Balanced budget: tax revenue and government spending is the same
Surplus budget: more tax revenue than spending
Deficit budget: more spending than revenue
How does the monetary policy and fiscal policy work?
They work together for the economy
How does the European union regulate financial services?
Regulations: binding in entirety and directly applicable to all member states( unless they have specific dispensation)
Directives: binding for the results to be achieved in a time frame( usually 2 years)
The European system of financial supervision
European securities and market agency
European banking agency
European insurance and occupational pension authority
UK regulatory frameworks
1st tier: Eu issue a directive
2nd tier: UK parliament
3rd tier: FCA & PRA
4th tier: financial institutions (ensure they obey)
5th: financial ombudsman service (complaints)
