Unit 1 - UK FS sector (2 of 80)

Question 1

Government’s economic policy 4 aims?

Answer 1

1) Achieve sustainable growth
2) Control Inflation
3) Full employment (low unemployment)
4) Manage the BofP

Question 2

Official term for UK budget deficit?

Answer 2

Public Sector Net Cash Requirement (PSNCR)

Question 3

Balanced budget multiplier?

Answer 3

Raising tax and expenditure by the same amount

Question 4

When is the UK budget each year?

Answer 4

Autumn

Question 5

Fiscal policy vs monetary policy?

Answer 5

Fiscal - taxation, public borrrowing & spending

Monetary - supply of money via interest rates

Question 6

Who sets interest rates in UK?

Answer 6

Monetary Policy Committee (MPC) of the BoE

Question 7

Who’s in the MPC?

Answer 7

9 members
Governor
2 x Deputy Governor
BoE Chief Economist
Executive Director
4 x External Members (appointed by Chancellor)
(meet 8 times per year)

Question 8

Primary vs Secondary Markets?

Answer 8

Primary = the market for new shares & securities (debt)

Secondary = mechanism for investors to sell/switch investments

Question 9

Current vs. Capital Account?

Answer 9

Current A/C = Tangible transactions i.e. imports and exports

Capital A/C = Net balance of Int’l Investments

Question 10

SEC Mission (4 points)?

Answer 10

Protect investors,
Maintain fair, orderly & efficient markets
Facilitate capital formation
Promoting disclosure of market info

Question 11

Role of the Fed?

Answer 11

Setting monetary policy (borrowing from and lending to banks etc)

Question 12

Office of Currency Comptroller’s role?

Answer 12

Supervising and regulating all national banks

Question 13

What is FINRA?

Answer 13

Financial Industry Regulatory Authority = regulator of all securities firm

Question 14

CFTC’s role?

Answer 14

Regulating derivatives markets

Question 15

3 EU Regulators?

Answer 15

European Insurance and Occ Pensions Authority (EIOPA)

European Banking Authority (EBA)

European Securites and Markets Authority (ESMA)

Question 16

Asian Regulators?

Answer 16

China - CSRC & CBIRC

HK - SFC & HKMA

Japan - FSA

Singapore - SIC

Question 17

How does QE work?

Answer 17

1) Central banks buy government debt from banks

2) Banks lodge proceeds with counterparty bank increasing deposit holdings

3) Counterpark increase deposits at central bank

Question 18

BoE’s Money Market Operations 2 objectives?

Answer 18

1) Implement monetary policy via overnight interest rates

2) Reduce Disruption to commer ial bank’s liquidity and payment services

Question 19

Narrow vs Broad Money?

Answer 19

Narrow money – a term used to describe the total sum of all financial assets (including cash) which are immediately liquid (i.e. not fixed deposit)

Broad money – in contrast, this term is used to describe the total sum of a wider range of assets – including some which are not as liquid as those falling within the definition of narrow money. It may include, for example, money held in savings accounts which are not instant access accounts.

Question 20

M0 vs M4?

Answer 20

M0 is the measure of notes and coin in circulation outside the BoE, plus operational deposits at the BoE.

M4 is the measure of notes and coin in circulation with the public, plus sterling deposits held with UK banks and building societies by the rest of the private sector.

Question 21

What is National Income?

Answer 21

‘the sum of all incomes of residents in the UK which arise as a result of economic activity, from the production of goods and services’ e.g. rent, wages and company profit

Question 22

National Income uses?

Answer 22

1) Measuring the standard of livnig in a country

2) Comparing the wealth of different countries

3) Seeing long term trends

Question 23

GNP and formula?

Answer 23

GDP + net property income from abroad

GDP = C + I + G + (X - M)

Question 24

Role of Financial Stability Board?

Answer 24

Monitors and makes recommendations about the global financial system.