Topic 5 - Financial Markets Flashcards
What are the 4 types of market competition?
Pure Competition, Monopolistic Competition, Oligopoly, Monopoly
Explain the features of Pure Competition
Many buyers with no market power
All firms sell the same product
No barriers for entry for firms
No restrictions to the quantity firms can offer for sale
Firms are price takers
Explain the features of Monopolistic
Large number of firms
The product sold are different ( i.e. naming products different to appear unique )
Most industries fall under this category
Explain the features of Oligopoly
Only a few relatively large firms, each with significant share of the market
They sell similar but differentiated products
Significantly higher barriers for entry
Explain the features of Monopoly
Only one firm selling the product
The product sold has no close substitutes
Significantly higher barriers for entry
The monopolist is the price seller
What is Cash Rate?
Cash Rate is the interest rate on loans between banks in the short-term money market.
What is monetary policy?
Monetary policy is a set of actions to control a nation’s overall money supply and achieve economic growth.
What does the Reserve Bank of Australia (RBA) do?
It conducts monetary policy, works to maintain a strong financial system and issues the nation’s currency.
What are the different type of markets?
Primary Markets
Secondary Markets
Derivative Markets
What is the RBA?
RBA stands for the Reserve Bank of Australia is Australia’s central bank.
Identify what the short-term money market is
The short-term money market is where banks lend and borrow money from each other and from the RBA.
What are the two types of finance (money)?
Direct finance
What are the reasons for borrowing?
When G&S exceeds individuals capacity to pay for it
Entrepreneurs to fund expansion of businesses
Government is in deficit
Australian financial institutions lend money overseas to borrowers
What is a Share
A financial asset that provides and individual with ownership over a part of a company.
What is a Foreign Exchange Market
A market where people can trade one currency for another
What does the RBA require in each baks exchange settlement account?
The RBA requires the money in each bank’s ESAs to be at a certain level.
What is a Global Dept Market
Where the international buying and selling debt securities (bonds) occurs.
