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2. BA-FM 24P(2018)-A (LEC) Banking and Financial Institution > Chapter 2: > Flashcards

Chapter 2: Flashcards

1
Q

Decrease the capacity of an economy to produce goods and services compared from one period of time to another.

A

Low Economic Growth

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2
Q

Indicators of Economic Growth

A
  1. Unemployment
  2. Poverty Incidents
  3. Law of supply and demand
  4. Inflation
  5. High Interest Rate
  6. GDP (Gross Domestic Product)
  7. Foreign Exhange
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3
Q

Majority of the working population are unemplyed

A

Unemployment

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4
Q

worker is employed but not in the desired capacity whether in terms of compensation, working hours, or skills level and work experience.

A

Underemployment

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5
Q

Number of households having an income below the poverty threshold.

A

Poverty Incidents

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6
Q

Income needed to sustain food and non-food needs of the household

A

Poverty Threshold

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7
Q

Perhaps one of the most fundamental concepts of economics and it is the backbone of a market

A

Law of supply and demand

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8
Q

How much of a product or service is desired by buyers.

A

Demand

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9
Q

Amount of product people are willing to buy at a certain price

A

Quantity Demanded

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10
Q

Relationship between price and quantity demanded

A

Demand relationship

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11
Q

Represents how much the market can offer

A

Supply

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12
Q

Amount of a certain goods producers are willing to supply when receiving a certain price.

A

Quantity Supplied

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13
Q

Perhaps one of the most fundamental concepts of economics and it is the backbone of a market economy.

A

Supply and demand

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14
Q

The correlation between the price and how much goods or service is supplied to the market.

A

Supply relationship

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15
Q

It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.

A

GDP

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16
Q

The monetary value of all the finished goods and services produced within a country’s borders in a specific time period. It is usually calculated on an annual basis.

A

GDP

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17
Q

The rate at which the general led prices for goods and services is rising and subsequently purchasing power of the peso falls

A

Inflation

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18
Q

A rate which is charged or paid for the use of money.

A

High Interest Rates

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19
Q

Often expressed as an annual percentage of the principal

A

Interest Rate

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20
Q

True or False

High rates increase loan costs, dissuading borrowing and saving. Existing borrowers have less disposable income; therefore, other areas of consumption will fall.

A

True

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21
Q

True or False

higher interest rates will tend to increase consumer spending and investment.

A

False

higher interest rates will tend to reduce consumer spending and investment.

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22
Q

True or False

A rise in interest rates encourages investment; it makes firms and consumers more willing to take out risky investments and purchases.

A

False

A rise in interest rates discourages investment; it makes firms and consumers less willing to take out risky investments and purchases.

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23
Q

True or False

Increased rates elevate mortgage costs, reducing consumer spending. Even slight hikes can significantly impact personal finances and decrease overall expenditure.

A

True

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24
Q

True or False

Higher interest rates make it more attractive to save in a deposit account because of the interest gained from saving.

A

True

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25
Q

True or False

Higher interest rates decrease the cost of government interest payments. This could lead to lower taxes in the future.

A

False

Higher interest rates increase the cost of government interest payments. This could lead to higher taxes in the future.

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26
Q

True or False

High rates attract savings domestically, bolstering the local currency. A stronger currency reduces export competitiveness and boosts import demand.

A

True

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27
Q

Is the value of it’s currency in the international market.

A

Foreign Exchange

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28
Q

True or False

If the price of exports rises by a smaller rate than that of its imports, the currency’s value will decrease in relation to its trading partners.

A

True

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29
Q

True or False

If the price of a country’s exports rises by a greater rate than that of its imports, its terms of trade have favorably improved.

A

True

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30
Q

Make’s country’s exports more Expensive and Imports cheaper in foreign markets

A

Higher Currency

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31
Q

Make’s country’s exports more cheaper and Imports expensive in foreign markets

A

Lower Currency

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32
Q

Lower Country’s Balance of trade; Increasing Country’s Balance of trade

A

Higher Exchange rate; Lower exchange rate

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33
Q

What causes an Unemployment

A
  • Low economic activities
  • Mismatch in education and training to the real manpower requirements
  • Over qualification, under qualification, under skilled.
  • Lack or poor training programs.
  • Lack of support services such as childcare and public transportation.
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34
Q

Higher Country’s Balance of trade

A

Lower Exchange rate

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35
Q

What causes an unemployment?

A
  • low economic activities
  • mismatch in education and training to the real manpower requirements
  • over qualification, under qualification, under skilled
  • lack or poor training programs
  • lack of support services such as childcare and public transportation
36
Q

are employment rendering working hours based on employer’s policy or the regular working hours per week of 40 based on 120. It comes with full benefits and privileges.

A

Full employment

37
Q

Causes of Poverty Incidence

A
  • Non-food basic needs
  • Clothing and footwear
  • fuel, light, and water
  • housing maintenance and other minor repairs
  • rental or occupied dwelling units
  • transportation and communications
  • non-durable furnishing
    -household operations
  • personal care and effects
  • education
  • medical care
38
Q

Goods and services bought by households for the satisfaction of their needs and wants

A

Consumer Spending

39
Q

Negative effects of Inflation

A
  • increase in opportunity cost of adding money
  • hoarding
40
Q

Positive effects of Inflation

A
  • real interest adjustment to mitigate recession
  • encourages investments in non-monetary capital projects
41
Q

Cause of inflation

A

excessive growth of money supply in the financial system

42
Q

An institution authorized by a government to accept deposits, pay interest, clear checks, make loans, act as an intermediary in Financial transactions, and provide other financial services to its customers.

A

Bank

43
Q

Effect of high Interest rates

A
  1. Increases the cost of borrowing
  2. Increase in mortgage interest payment
  3. Higher interest rates increase the value of exchange rate
  4. Increased incentive to save rather than spend
  5. Rising interest rates affect both consumers and firms
  6. Government debt interest payments increase
44
Q

Determinants of foreign exhange

A
  1. Differentials in Inflation
  2. Differentials in Interest Rates
  3. Public Debt
  4. Terms of Trade
  5. Political stability and economic performance
45
Q

passed a law establishing a central bank, but disapproved by President Franklin D. Roosevelt

A

1939, (through Tydings-McDuffie Act)

46
Q

passed same law, but implementation was aborted due to American liberalization

A

1944, (Japanese occupation)

47
Q

Pres. Manuel Roxas assumed office, he instructed then Finance Secretary Miguel Cuaderno, Sr. to draw up a charter for a central bank.

A

1946

48
Q

1st BSP Governor

A

Mr. Cuaderno

49
Q

He selected charter of the Central Bank of Guatemala as model for the BSP because of its similar economic and social conditions.

A

Mr. Cuaderno

50
Q

The Commission, which studied Philippine financial,
monetary and fiscal problems in _________, recommended a shift from the dollar exchange standard to a managed currency system. A central bank was necessary to implement the proposed shift to the new system.

A

1947

51
Q

Central Bank Council, charter of a proposed monetary authority

A

1948

52
Q

PD No. 72, Joint IMF-CB Banking Survey Commission - a study of the Philippine banking system - program designed to ensure the system’s soundness and healthy growth.

A

29 November 1972

53
Q

Pres. Fidel V. Ramos signed into law Republic Act No. 7653, the New Central Bank Act, on ________________-establishment of an independent monetary authority to be known as the Bangko Sentral ng Pilipinas, with the maintenance of price stability explicitly stated as its primary objective.

A

14 June 1993

54
Q

the New Central Bank Act took effect.

A

3 July 1993

55
Q

is the chief executive officer of the BSP and is required to direct and supervise the operations and internal administration of the BSP.

A

Governor

56
Q

exercises the powers and functions of the BSP, such as the conduct of monetary policy and supervision of the financial system

A

Monetary Board

57
Q

Its chairman is the BSP Governor, with five full-time members from the private sector and one member from the Cabinet.

A

Monetary Board

58
Q

The BSP’s Organizational Structure:

A

Executive Management Services:

Monetary Board
Governor

Functional Sectors:
1. Monetary Stability Sector
2. Supervision and Examination Sector
3. Resource Management Sector
4. Security Plant Complex

59
Q

The primary objective of BSP’s ________________ is to promote a low and stable inflation conducive to a balanced and sustainable economic growth.

A

Monetary Policy

60
Q

Restrict credit and raise interest rates. - Pursued to limit inflation.

A

Tight Money Policy

61
Q

Pursued to limit inflation.

A

Tight Money Policy

62
Q

Make money plentiful and available at low interest rates.

A

Easy Money Policy

63
Q

Pursued to encourage investment and economic growth.

A

Easy Money Policy

64
Q

The business activity of accepting and safeguarding money owned by individuals or institutions and lending them out to earn profit is _____________

A

Banking

65
Q

Essential Elements of Banks

A
  • Accept deposit
  • Pay interest
  • Clear checks
  • Make loans
  • Act as intermediary in financial transactions
  • Provide other financial services
66
Q

has the same powers as a commercial bank

A

Universal Bank

67
Q

Classification of banks

A
  1. Universal Bank
    2.Commercial Bank
    3.Thrift Bank
  2. Rural and cooperative bank
68
Q

The powers of an ________________________ as provided in existing laws and the power to invest in non-allied enterprises.

A

Investment House

69
Q

Required Capitalization of Universal Banks

A

Php 4.95 Billion

70
Q

Has the power to accept drafts and issue letters of credit;

A

Commercial Bank

71
Q

discount and negotiate promisory notes, drafts, bills of exchange, and other evidences of debt;

A

Commercial Bank

72
Q

accept or create demand deposits;

A

Commercial Bank

73
Q

receive other tyoes of deposits and deposit substitutes;

A

Commercial Bank

74
Q

buy and sell foreign exchange and gold or silver bullion;

A

Commercial Bank

75
Q

acquire marketable bonds and other debt securities;

A

Commercial Bank

76
Q

and extend credit.

A

Commercial Bank

77
Q

Required Capitalization of Commercial Bank

A

Php 2.4 billion

78
Q

Has the power to accept savings and time deposits, act as a correspondent with other financial institutions and as a collection agent for government entities, issues mortgages, engage in real estate transactions and extend credit.

A

Thrift Bank

79
Q

Required capitalization of Thrift Bank

A

Php 325M

80
Q

banks are the more popular type of banks in the rural communities.

A

Rural and cooperative bank

81
Q

Help farmers through the stages of production, from buying seedlings to marketing of their produce.

A

Rural and Cooperative banks

82
Q

Privately owned and managed

A

Rural Banks

83
Q

are organized/owned by cooperatives or federation of cooperatives.

A

Cooperative banks

84
Q

It shall provide policy directions in the areas of money, banking, and credit.

A

BSP

85
Q

It shall hve supervision over the banks and exercise such regulatory powers as provided in this Act and other pertinent laws.

A

BSP

86
Q

Functions of BSP

A
  1. Liquidity Management
  2. Currency Issue
  3. Lender of Last Resort
  4. Financial Supervision
  5. Management of Foreign Currency Reserves
  6. Determination of Foreign Exchange Rate Policy
  7. Banker, Financial Adviser and official depository of the Philippine Government and GOCC
87
Q

Is the process of concealing the exxistence, illegal source or application of income derived from criminal activities and subsequently disguising the source of income to make it appear legitimate or charging the form or moving the funds to a pac where they are not likely to attract attention.

A

Money Laundering

2. BA-FM 24P(2018)-A (LEC) Banking and Financial Institution (9 decks)

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