Unit 1 Topic 2

Question 1

What are the 4 macroeconomic objectives ?

Answer 1

Price Stability

Low Unemployment

Balance of Payment Equilibrium

Satisfactory Economic Growth.

Question 2

What are the phases of the cycle

Answer 2

Recovery & Expansion- interest rates are lower people have more money to spend
Boom, - people spend more BOE want to control the spending so they will intervene to increase the interest rates
Contraction / Slow Down, - when the interest rates are very high and people spending less
Recession.-economic activity is really low because people spending less and BoE will step in to reduce interest rates

Question 3

What is monetary policy and fiscal policy?

Answer 3

Monetary policy involves controlling the money supply and credit growth to influence inflation rates, often done by adjusting interest rates.

Fiscal policy, on the other hand, influences economic activity, consumption, and investment by manipulating government finances through taxation and expenditure.

Question 4

What are directives and regulation ?

EU laws can take the form of regulations (binding in their entirety) or directives (leaving discretion to member states on how to implement them).

Answer 4

Regulations

Are binding in their entirety, both in respect of what is to be achieved and how it is to be achieved.

Are directly applicable to all member states (unless there are dispensations).

Directives

Each member state has discretion as to how they go about implementing the direction.

The objective must be achieved within a specific timescale (usually two years) but how they are achieved is left to the authorities to determine

Question 5

What are the 5 tier process of the financial service industry in UK?

Answer 5

EU Legislation,
Acts of Parliament,
Regulating Bodies (such as the FCA and PRA),
Financial Institutions’ internal compliance departments, and Arbitration schemes (like the Financial Ombudsman Service)