start Flashcards
what is a financial instrument
a financial liability to the issues and a financial asset to the owner
what is the key distinguishing characteristic of a security?
can be traded on a second hand market
what makes money money?
For something to be money in a modern financial system, it should be a financial instrument with a nominal value fixed in the units used by the government to determine tax liabilities and legal debt obligations.
must be ‘that which is acecptable in payment of taxes’ and ‘guaranteed convertible into cash at par’
bitcoin and gold are what?
speculative assets
NOT monetary instruments
NOT financial instruments
what is the monetary base?
the total amount of currency that is either circulated in the hands of the public or in the commercial bank deposits held in the central bank reserves.
the government’s balance at the RBA is NOT part of the monetary base
cash rate is driven down when…
commercial banks don’t need to borrow from RBA (i.e. decreased demand)
which canNOT accept retail deposits in australia?
a) australian subsidary of a foreign bank
b) mutual bank
c) australian branch of a foreign bank
d) building society
c) australian branch of a foreign bank
define quantitative easing
central banks buying governmnet securities from private financial institutions when short term interest rates are close to 0 with the aim of influencing long term interest rates and other asset prices in such a way as to encourage increases in investment and consumer spending
you get quoted AUD/USD 0.75-0.76.
with AUD 1,00,000 how much USD can you get?
USD 750,000
which of the following is not an asset for a bank:
a) ESAs
b) loans made to customers
c) retained earnings (profits not paid out in dividends to shareholders)
d) cash
e) gov securities owned by the bank
retained earnings are NOT an asset for a bank
suppose that a central bank cancels a portion of a coutnry’s outstanding currency at issue (like in india in 2016), what is the effect on the balance sheet of the central bank?
liabilities will fall
net worth will rise
due to the decrease in the value of notes held outside of the central bank
monetary base includes
notes and coins in circulation
bank vault money
ESAs
what is and isnt included in the current account of the balance of payments
yes:
interest rates paid to foreign investors
spending by tourists
dividends paid by a foreign company to an australian fund manager
earning from agricultural exports
no:
a loan made by an australian bank to a foreign company
outline theory M of history of money
has origins of money in a barter system of exchange
outline theory C of money
explains money as having its origins in the first taxes and tributes paid to governments
