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Money
Question | Answer |
---|---|
Give 5 reasons money had to be introduced | Double coincidence of needs and wants. Uncertainty of exchange rate. Goods are not of uniform quality. Divisibility. Specialisation of labour is discouraged. |
What is the gold standard? | Acurrency where notes are fully backed and redeemable by an equivalent amount of gold |
Why did Britain abandon the gold standard? | WW1 |
What is the fiduciary issue? | The proportion of a countries currency not backed by gold but by foreign currencies and securities |
Define money | Anything that is generally accepted by people in exchange for goods and services |
Name four functions of money | A medium of exchange. A measure of value. A standard for deferred payments. A store of wealth |
Name 7 characteristics of currency | Instantly recognisable as genuine. Generally acceptable. Portable. Reasonably durable. Divisible. Scare in relation to demand. Homogenous. |
Name 6 forms of money | Cash. Cheques. Electronic payments. ATM cards. Debit cards. Credit cards. |
Define legal tender | Money that must be accepted if offered as payment |
What are the 5 functions of the ECB? | Maintains price stability. Formulates EU monetary policy. Holds and manages the official reserve of the euro area countries. Financial stability and supervision. Sole right to issue euro currency. |
Define monetary policy | Actions by the ECB that influence money supply, interest rates and credit availability. |
Name 5 ways the ECB implements monetary policy | Monitoring growth of money relative to worth. Engaging in open market operations. Controlling interest rates. The use of standing facilities. Minimum reserve requirements. |
Name 2 kinds of standing facilities | Marginal lending facility. Deposit facility. |
Name 2 ways the ECB impacts the Irish economy | Monetary policy. Emergency liquidity assistence. |
What is the central bank of Ireland? | The body responsible for central banking and financial regulation |
Name 9 functions of the CBI | Issues legal tender. Government bank. Regulator of financial sector. Official external reserves. Maintains price stability, and financial stability. Provides Central bank reports. Protects consumers. Banker's bank. |
How does the ICB act as a bankers bank? | Clearinghouse department. Lender of last resort. |
What is a commercial bank? | Institutions that provide deposit and lending services to personal consumers and businesses. |
Name two three kinds of banks | Merchant/wholesale banks. Industrial banks. |
What is a credit union? | A group of people who save together and lend to each other. Each credit union is owned by its members. |
What national company acts as an agent of the NTMA? | An Post |
What is the capital adequacy ratio? | The percentage of a banks capital to its risk weighted assets |
What are a banks two objectives? | Profitability and liquidity |
Name two earning assets | Term loans and overdrafts. Government stock/ gilt securities. |
Name three earning assets | Exchequer bills/bills of exchange. Money at call. Cash deposits. |
What percentage of assets are earning assets? | 70% |
What percentage of assets are liquid assets? | 30% |
What percentage of assets are term loans? | 50% |
What percentage of assets are government stock? | 20% |
What percentage of assets are exchequer bills? | 12% |
What percentage of assets are money at call? | 8% |
What percentage of assets are cash deposits? | 10% |
What are four restrictions on credit creation? | Bank ratios. ECB guidelines. Supply of credit worthy customers. Economic recession. |
Name three things affected by reduction in the availability of credit | Motor industry. Inflation. Ireland's balance of payments. |
What is the nominal interest rate? | The interest rate unadjusted for inflation |
What is the real rate of interest? | The nominal interest rate less the rate of inflation |
Name 8 effects of an increase in interest rate | Borrowing discouraged. Savings encouraged. Increase in cost of national debt. The cost of capital increases. Investment discouraged. Economic growth dampened. Increase in DIRT revenue. |
Name 8 effects of a decrease in interest rate | Borrowing encouraged. Savings discouraged. Increased housing demand. National debt cost falls. Cost of capital falls. Investment encouraged. Economic growth encouraged. Decrease in DIRT revenue. |
What is NAMA? | A body created by the government of Ireland in late 2009, in response to the Irish financial crisis and the deflation of the Irish property bubble. |
What is the purpose of NAMA? | NAMA functions as a bad bank, acquiring property development loans from Irish banks in return for government purple debts bonds, ostensibly with a view to improving the availability of credit in the Irish economy. |
Name 4 consequences of NAMA | Banks prevented from insolvency. Artificial property price floor. Banks received fresh capital. If NAMA makes a short term loss money will be lost from the exchequer and hence public services. |
Name two factors that caused Ireland's banking collapse | The interbank market. The credit crunch. |
Give six reasons banking regulation is needed | Protect consumers. Proper lending policies. Banking system stability. Economic stability. Less need for gov. intervention. Less need for emergency funds. |