Macro Booklet 4 Flashcards
(45 cards)
What is an asset?
A thing that someone owns which has a market value and is capable of generating an income.
Assets can include physical items like property, as well as intangible items like stocks.
What does barter refer to?
Trading one good or service directly for another.
This form of trade does not involve money.
What is broad money?
Includes everything in narrow money but also assets that serve as stores of value but are too illiquid to serve as a medium of exchange.
Broad money encompasses cash, checking deposits, and other liquid assets.
What are capital markets?
A financial market which provides long-term lending, with assets such as government bonds maturing in a year or more.
Capital markets are made up of primary and secondary markets.
What is the capital ratio?
The proportion of a bank’s funding that has come in the form of equity (i.e. sale of shares and reserves [retained profit]), as opposed to deposits etc.
What is a central bank?
A bank such as the Bank of England that acts as a national bank and provides services to government and the banking system and controls monetary policy.
What is a commercial bank?
A financial institution which aims to make a profit by selling banking services to its customers.
What are commercial bills?
Like Treasury bills, but to raise financial capital for firms.
What is commodity money?
The use of a commodity with intrinsic value to facilitate trade (e.g. precious metals).
What are corporate bonds?
A long-term source of finance for firms, where investors buy a bond for a sum of money which is returned to them when the bond matures, in addition to an annual coupon.
What is a coupon?
The annual payment (often paid in two instalments) to owners of government bonds expressed either as a fixed amount or as a percentage of the face value.
What is equity?
The money put into a business by its shareholders (i.e. share capital and retained profit).
What is the purpose of the Financial Conduct Authority (FCA)?
Microprudential regulator that focuses on promoting competition and protecting consumers.
What does the Financial Policy Committee (FPC) do?
A macroprudential regulator whose primary function is to maintain the stability of the financial system overall, with a secondary objective in supporting the government’s economic policy.
What are foreign exchange markets?
The trade in foreign currencies.
What is forward guidance?
A form of unconventional monetary policy whereby the central bank gives signals to financial markets over the future direction of monetary policy.
What is fractional banking reserve?
A system of banking where only a fraction of deposits are held in cash available for withdrawal (while the rest is advanced to borrowers).
Funding for Lending Scheme
A scheme launched by the Bank of England in July 2012, designed to encourage banks and building societies to expand lending to households and SMEs by offering them cheap credit
Government Bonds/Gilts
A long term source of finance for governments, used to finance a budget deficit, where investors buy a bond for a sum of money which is returned to them when the bond matures, in addition to an annual coupon
Investment Bank
A bank which does not generally accept deposits from the public but deals directly in financial markets for their own account and offers financial advice and consultancy, help with stock market floatations
Liability
Something that is own to someone
Liquidity
The ease with which an asset can be converted into cash without loss of value
Liquidity Ratio
The ratio between banks liquid assets and its expected outflows
Macroprudential
Relating to the overall stability of the financial system
