💳 Deck 5: The Financial Sector Flashcards
(12 cards)
Q: 💰 What are the functions of money?
A: Medium of exchange, unit of account, store of value, and standard of deferred payment.
Q: 🏦 What is the role of financial markets?
A: To facilitate the allocation of resources, risk sharing, and the transfer of funds from savers to borrowers.
Q: 🏛️ What is the role of the central bank?
A: Managing the nation’s currency, money supply, and interest rates, and overseeing the commercial banking system.
Q: 🔒 What is financial regulation?
A: The supervision of financial institutions to ensure stability, transparency, and fairness in the financial system.
Q: 🏦 What is the role of banks in the economy?
A: Accepting deposits, providing loans, and facilitating payments.
Q: 💸 What is credit creation?
A: The process by which banks expand the money supply by lending more than the base of deposits.
Q: 📉 What is the base rate?
A: The interest rate set by the Bank of England, influencing all other interest rates.
Q: 🏢 What is a commercial bank?
A: A financial institution offering services like savings, loans, and mortgages to the general public.
Q: 🏛️ What is a central bank’s lender of last resort function?
A: Providing liquidity to banks facing short-term difficulties to prevent collapse.
Q: 🧠 What is moral hazard in banking?
A: When banks take excessive risks, believing they’ll be bailed out if things go wrong.
Q: 🔄 What is systemic risk?
A: Risk of collapse in the entire financial system due to the failure of a key institution.
Q: 🧾 What are capital requirements?
A: The minimum capital banks must hold to cover potential losses.
