Cheaper Borrowing; Increase in Consumption, Investment, AD, Economic Growth and Inflation.
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Impact of High Interest Rates
Expensive Borrowing; Decrease in Consumption and AD, Inflation and Growth; Increase in Savings.
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Functions of Central Banks
Manages: printing money and its distribution, currency reserves, government payments, national public debt, regulates banking sector, set the nation's interest rates, last resort lender to the banks.
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Reasons for the Financial Crisis
Market Rigging, Market Bubbles Popping, Asymmetric Information, Globalisation, Over-loaning, Insurance against the loans given out, Selling high risk loans as low risk.
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Consequences of the Financial Crisis
Less Access to credit, 30 million lost jobs, 15 million on the poverty line, Higher inequality, USA national debt doubled.
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Role of Financial Markets
Facilitate savings, Lend to businesses, Facilitate the exchange of goods/services, Provides forward markets (future markets) in currencies and commodities, Provide a market for equities (shares).
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Commercial Banks
Accept deposits and provide security and convenience to their customers.
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Investment Banks
Deal with financial instruments such as shares and futures.
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Brokerage
An intermediary between buyers and sellers to facilitate securities transactions.
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Investment Company
Where individuals invest in professional portfolios of securities.
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Insurance Company
Collecting premiums from a large group of people who want to protect themselves from risk.
Cheaper Borrowing; Increase in Consumption, Investment, AD, Economic Growth and Inflation.
Back
Card 4
Front
Expensive Borrowing; Decrease in Consumption and AD, Inflation and Growth; Increase in Savings.
Back
Card 5
Front
Manages: printing money and its distribution, currency reserves, government payments, national public debt, regulates banking sector, set the nation's interest rates, last resort lender to the banks.
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