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CeMAP Unit 1 > Topic 2: Economic Policy & Financial Regulation > Flashcards

Topic 2: Economic Policy & Financial Regulation Flashcards

1
Q

What is Inflation?

A

Increase of goods and services

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2
Q

What is Disinflation?

A

Prices of goods still increasing but slower

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3
Q

What is Deflation?

A
  • A fall in the price of goods and services
  • Below 0%
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4
Q

A objective that relates to the economy as a whole

A

Macroeconomic Objective

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5
Q

What are the 4 key microeconomic objectives?

A
  1. Price Stability
  2. Low unemployment
  3. Balance of payments equilibrium
  4. Satisfactory economic growth
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6
Q

What type of macroeconomic objective is classed as ?

“Low and controlled rate of inflation”

A

Price Stability

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7
Q

What type of macroeconomic objective is classed as ?

“Demand for increase of labour, land & capital

A

Low unemployment

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8
Q

What type of macroeconomic objective is classed as ?

Balancing of imports and exports that is linked to exchange rates

A

Balance of payments equilibrium

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9
Q

What type of macroeconomic objective is classed as ?

Growing economy and increase in living standards

A

Satisfactory economic growth

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10
Q

Which macroeconomic objectives are linked to each other?

A
  1. Low unemployment & satisfaction economic growth
  2. Price Stability & Balance of payments equilibrium
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11
Q

What is an overall measurement of a countries economy activity over a period of time?

A

GDP (Gross Domestic Product)

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12
Q

What 4 stages do economies go through?

A
  1. Recovery and Expansion
  2. Boom
  3. Contraction/Slowdown
  4. Recession
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13
Q

CPU (Consumer Price Index) aims to keep inflation at what percentage?

A

1- 3%

Divergence either side of 1%

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14
Q

How does the monetary policy aim to control inflation?

A

By manipulation of interest rates to control the amount of money in the economy

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15
Q

Why do banks and financial institutions alter interest rates in line with the BOE?

A

To cover cost and make profit

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16
Q

How does interest charges affect tracker mortgage holders?

A

Increases may mean the borrow cannot afford the mortgage

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17
Q

What is Fiscal Policy?

A

Use of taxes and public spending to manage the economy
(macroeconomic objectives)

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18
Q

What type of budget is defined as?

  • Taxation and public sector are equal
  • Tax invested in public sector
A

Balanced Budget

19
Q

What type of budget is defined as?

  • Taxation is greater than public spending
  • Economy contracts
A

Budget Surplus

20
Q

What type of budget is defined as?

  • Public Spending is greater than taxation
  • Economy Expands
A

Budget Deficit

21
Q

Public Service Net Cash Requirement (PSNCR) is used when?

A
  1. Public Sector has deficit
  2. Must borrow to cover deficit
22
Q

What are Indirect Taxes?

A

Tax applied to goods and services

23
Q

What are Direct Taxes?

A

Taxes applied to Individuals and their assests

24
Q

Taxation increases lead to what?

A

Fall in inflation

25
Q

Decrease in taxation leads to what?

A

Increase in inflation

26
Q

What 2 ways do tax increases affect financial services?

A
  1. Reduces money for investments and repayment
  2. Makes some products less attractive
27
Q

The Revocation and Reform Bill of 2022 allowed the government to do what?

A

Amend EU law in the UK post Brexit

28
Q

Most common EU law types are?

A
  1. Regulation
  2. Directives
29
Q

What EU law is defined as?

  • Have general application
  • Binding in entirely in what and how it is to be achieved
  • Directly applicable in all member states
A

Regulations

30
Q

What EU law is defined as?

  • Binding to each member states addressed as a result to be achived
  • Each state has discretion as to how these are achieved
  • Objective must be achieved with 2 years
A

Directives

31
Q

Post BREXIT does the UK need to adopt EU legislation?

A

No they can decide if they want to

32
Q

The commission set up to monitor financial regulation across the EU is called what?

A

European System of Financial Supervision (ESFS)

33
Q

The ESFS has Supervisory authorities called?

A

European Supervisory Authorities (ESA)

34
Q

ESA has power to do what?

A

Make decisions and rules change to regulatory bodies

35
Q

Are the PRU & FCA part of ESFS post Brexit?

A

No (but must follow ESA rules over UK businesses providing services to clients in EU countries

36
Q
  • European Securities & Markets Agency (ESMA)
  • European Banking Authority (EBA)
  • European Insurance & Occupational Pensions Authority (EIOPA)
A

Are the ESA

37
Q

What are the 4 tiers of regulatory oversight in the UK?

A
  1. Acts of Parliament
  2. Regulatory Bodies
  3. Financial Institutions Policies & Procedures
  4. Arbitration Schemes
38
Q

Which regulartory tier is this?

  • Sets out what can or can’t be done
  • legalisation called “ statutory requirements”
A

Acts of Parliament

1st tier

39
Q

Which regulartory tier is this?

  • monitors rules and regulation about legislation
A

Regulatory Bodies

2nd tier

40
Q

What are the main regulatory bodies in the UK?

A
  • PRU (Predentual Regulation Authority
  • FCA ( Financial Conduct Authority)
41
Q

Which regulartory tier is this?

  • Ensure they operate legally & competently
A

Financial Institutions Policies & Procedures

3rd tier

42
Q

Which regulartory tier is this?

  • Financial Ombudsman Scheme
  • Refer customers complaints
A

Arbitration Schemes

4th tier

43
Q

What is the name of the ECB’s organisation for supervision and monitoring of banks in the EU

A

Single Supervisory Mechanism (SSM)

44
Q

What does the SSM do?

A
  • Bank monitoring & supervision in EU
  • Common approach to banking
  • ECB has final decision on supervisory matters

CeMAP Unit 1 (18 decks)

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