Topic 2 Flashcards
What are the four key macroeconomic objectives?
- Price stability
- Low unemployment
- Balance of payments equilibrium
- Satisfactory economic growth
What are the four main phases of economies?
- Recovery and expansion
- Boom
- Contraction or slowdown
- Recession
What is the target for inflation and how is inflation measured?
2% is the target with a 1% allowance either way.
It is measured with CPI
What two types of policy are used by governments to achieve long term economic objectives?
- Monetary policy - Measures taken to control the supply of money in the economy (eg interest rate changes)
- Fiscal policy - Changes in the levels of taxation vs public spending
What are the two main ways changes in taxation affect the financial services and products market?
- Increased taxation reduces the amount of money available for investment or to fund loan repayments
- Tightening of the taxation regime in relation to certain products or activities makes them less attractive.
What is the difference between ‘Regulation’ and ‘Directives’ in relation to EU law?
Regulation - These need to be implemented as per the regulation and as per how it states this should be achieved.
Directives - Each member state has discretion as to how they achieve the aim of the directive, but the objective must be achieved within a specific timescale (normally 2 years).
Outline the three tiers of ‘The European system of financial supervision’
European Systemic risk board (At the top)
European supervisory authorities (next down)
National Authorities, eg FCA (bottom)
What are the five tiers of regulatory oversight in the UK?
1 - Onshored EU legislation that the government retained in UK statue following brexit.
2 - Acts of parliament
3 - Regulatory bodies (FCA & PRA for example)
4 - Policies and practices of financial institution themselves
5 - Arbitration schemes eg Financial Ombudsman Service
