Financial Markets And Monetary Policy

Question 1

Bond

Answer 1

Debt; represents money that must be paid back over a period of time

Question 2

Broad money

Answer 2

Money held in banks and building societies not easily accessible

Question 3

Contractionary monetary policy

Answer 3

Monetary policy implemented to decrease aggregate demand

Question 4

Default

Answer 4

The failure or inability to meet the deadline of a loan

Question 5

Dividends

Answer 5

Portion of firms profits paid to shareholders

Question 6

Equation of exchange

Answer 6

MV=PQ

M- stock of money
V- velocity if circulation
P- price level
Q- real output

Question 7

Expansionary monetary policy

Answer 7

Monetary policy implemented to decrease AD

Question 8

Hot money

Answer 8

Highly volatile money derived from investors storing money in different institutions

Question 9

Interest

Answer 9

Money paid to a lender by a borrower

Question 10

Monetary policy

Answer 10

Use of interest rates and other monetary instruments to achieve macroeconomic objectives

Question 11

Money supply

Answer 11

Stock of money in the economy, comprised of cash and bank deposits

Question 12

Narrow money

Answer 12

Physical money and more liquid assets

Question 13

Quantitative easing

Answer 13

Banks buying government bonds

Question 14

Reserve currency

Answer 14

Foreign currency held in a country’s official reserves due to its value as a medium of exchange

Question 15

Systemic risk

Answer 15

When issues within one firm in the financial sector could bring about the collapse of the economy

Question 16

Equity capital

Answer 16

A stake or share within the firm- dividends