2 Flashcards
Monetary policy
Government control of money supply and inflation
Fiscal policy
Governments control of spending and taxation
The greater fool theory
Relying on there being a greater fool than yourself to purchase shares at a higher price
Bull and bear market
Bull - confident and rising market
Bear - tentative and falling market
Globalisation
Process for which companies influence or operate on a global scale
Advantages and disadvantages to globalisation
A - low cost labour and high yielding stocks
D - puts low skilled labour in a developed world at a disadvantage and political landscape of the country tour in dictates economic prospects
Economic cycle
recession, recovery, boom, contraction
Recession
2 consecutive quarters of declining GDP
When do the price of equities increase and decrease the most?
They match the cycle. So grow fastest during expansion, falter during boom and fall during contraction
When are interest rates usually cut during the business life cycle?
During contraction stage
When will fixed interest securities need higher yields to compete and when do costs increase?
During boom economy stage as costs increased during expanding stage
Who sets interests rates?
Monetary policy comittee (Within BoE)
Macro economic asset classes
MO ‘Narrow money’ - Notes and coins in circulation. Bank deposits
‘M4 ‘Broad money’ - All of MO plus instant access account funds and time deposits in UK accounts
How to increase and reduced MO and M4?
MO - anything causing consumer spending to be bouyant which increases and opposite causes decrease
M4 - increased by loans from banks as they go into their account
RPI
Basket of UK goods that’s are bought by most UK households
