paper 1 final Flashcards Preview

Micro > paper 1 final > Flashcards

Flashcards in paper 1 final Deck (9)
Loading flashcards...
1
Q

5 functions of finance (films)

A
forward markets
insurance
lending
market for equities
saving
2
Q

problems with financial markets (maman)

A
moral hazard
asset bubbles
market rigging (collusion)
asymmetric information
negative externalities
3
Q

how does speculation affect exchange rates

A

if believed that pound will fall, sell pounds

as supply of pounds goes up, value does indeed fall

4
Q

how does economic growth affect exchange rates

A

pound goes up because markets expect interest rates to rise (and then hot money is in play)

5
Q

three ways of regulating the financial system

A
  1. setting a liquidity ratio (ratio of short term assets that can be used to pay SR debt)
  2. risk management e.g. PRA
  3. transparency
6
Q

three ways of regulating the financial system

A
  1. setting a liquidity ratio (ratio of short term assets that can be used to pay SR debt)
  2. risk management e.g. PRA
  3. transparency
7
Q

Unemployment trap

A

occurs when an individual is little better off getting a job than staying unemployed, and is a major disincentive to find work

8
Q

Earning trap

A

Earning trap occurs when a low income working individual or household earns more
but the net gain is little or negative
(bc of taxes)

9
Q

problem with deregulation?

A

‘creaming’ of markets –>firms only provide services in most profitable areas of the market