What does a financial institution complete and facilitate?
Monetary transactions such as loans, mortgages, and deposits.
How do banks finance economic growth?
By transforming short-term deposits into long-term loans or investments.
What does gross domestic product measure?
The value of goods and services produced within an economy.
What is an institution?
A set of rules, enforcement characteristics, and behavioural norms structuring repeated human interaction.
What distinguishes banks from credit unions in profit distribution?
Banks are for-profit, credit unions distribute profits among members.
What type of communities do community development financial institutions serve?
Underserved communities and low-income individuals.
What role do government lenders play in financial activities?
They provide guarantees to facilitate activities.
What kind of guarantees might government lenders provide?
Guarantees related to rent arrangements.
What credit assessment methods do specialized lenders primarily use?
Transaction-based and collateral-based credit assessment.
How do specialized lenders compare to high-street lenders in flexibility?
Specialized lenders are more flexible than high-street lenders.
What does a central bank govern and implement?
It governs commercial banks and credit unions and implements monetary policy.
How does a central bank implement monetary policy?
By controlling money supply, interest rates, and liquidity.
What is the Federal Reserve System responsible for?
Setting and enacting monetary policy, supervising, and regulating financial institutions.
What is the European Central Bank's role in the EU?
It is one of the seven EU institutions and the central bank for the eurozone.
How many member countries does the International Monetary Fund have?
It has 190 member countries.
What are the main goals of the International Monetary Fund?
Supporting financial stability, monetary cooperation, sustainable growth, and prosperity.
What is the money supply?
The total stock of money in circulation including cash, coins, bank balances, and liquid assets.
What are the main functions of money?
Medium of exchange, measure of value, means for lending and borrowing, and store of purchasing power.
What does the monetary aggregate M0 include?
Currency notes, coins, and bank reserves.
How is M1 defined in monetary aggregates?
M0 plus demand deposits.
What additional assets are included in M2?
Marketable securities and less liquid bank deposits added to M1.
What does M3 add to M2 in monetary aggregates?
Money market funds.
What does M4 include beyond M3?
Least liquid assets.
Which monetary aggregates measure money supply in the eurozone?
M1, M2, and M3.
What defines a fiat currency's value?
Its value depends on public confidence in its government or central bank issuer.
What is electronic money?
Digitally stored monetary value issued by licensed banks or electronic-money institutions.
How is electronic money used?
As a digital alternative to cash.
What is digital currency?
Regulated and unregulated money available purely in digital form.
What is cryptocurrency in relation to digital currency?
One type of digital currency.
What is cryptocurrency?
A virtual currency using cryptography to validate transactions and record them on a blockchain or distributed ledger.
What is a blockchain?
A decentralised, distributed public ledger storing data in linked blocks across a network.
What is a subprime mortgage?
A high-risk home loan to borrowers with poor credit or repayment ability.
What triggered the 2007 subprime crisis?
Low interest rates and abundant lending fueled a housing boom that collapsed.
What is a credit crunch?
A situation where loans become unavailable, difficult, or expensive.
What factors were linked to the 2007–2008 credit crunch?
Easy credit, lax lending, more subprime mortgages, and risky speculation.
When did Lehman Brothers file for bankruptcy?
On September 15, 2008.
How large were Lehman Brothers' assets at bankruptcy?
$639 billion in assets.
How much debt did Lehman Brothers have at bankruptcy?
$619 billion in debt.
Which cryptocurrency exchange filed for bankruptcy in the US in 2022?
FTX filed for bankruptcy protection in 2022.
When was Sam Bankman-Fried convicted for defrauding investors?
In November 2023.
What is the role of the Financial Stability Board?
It monitors the global financial system and promotes financial stability.
What type of agency is the Securities and Exchange Commission?
An independent United States federal agency.
Under which act was the SEC established?
The Securities Exchange Act of 1934.
How many members head the SEC?
Five members head the SEC.
What does the New York State Department of Financial Services regulate?
Financial services and products in New York.
What is a key function of the New York State Department of Financial Services?
Safeguarding firms and consumers against financial crime.
What services does microfinance primarily provide?
Banking services, especially small working-capital loans.
Who are the main clients of microfinance?
Low-income individuals without other access to financial services.
What is microfinance's main goal compared to banks?
To alleviate poverty through credit and financial training.
What do banks primarily focus on instead of poverty alleviation?
Profitability and economic growth.
What type of capital is venture capital?
Risk capital invested in start-ups and expanding small businesses.
What potential do businesses funded by venture capital have?
Substantial growth and profit potential.
Who are business angels?
Wealthy individual investors.
What distinguishes venture capitalists from business angels?
They are specialist institutions investing pooled funds.
What does a business plan describe about a business?
Its organisation, objectives, strategies, economic sector, market, and financial forecasts.
How does a business plan help a firm with finance?
It helps obtain finance by communicating the project to banks and investors.
What are the criteria of SMART operational objectives?
Specific, measurable, achievable, realistic, relevant, and time-specific.
What factors does a STEEPLE analysis examine?
Social, technological, economic, environmental, political, legal, and ethical factors.
What rights do shares or equities give owners?
Voting rights and participation in company policy decisions.
What claims do bonds give holders?
Debt claims and interest payments without ownership rights.
What is a bond?
A debt security promising periodic interest and face value repayment.
What does an investment fund do with investors' capital?
Pools and invests it collectively in financial instruments.
What is the goal of the European Capital Markets Union?
To create a single market for capital and improve investment opportunities.
What is a derivative in finance?
A financial instrument whose value is derived from an underlying asset, commodity, or index.
What does spread betting involve in financial markets?
Speculating on market direction without owning the underlying asset, often using leverage.
What does a bullish investor expect about a security's price?
That the price will rise.
What does a bearish investor expect about a security's price?
That the price will fall.
What defines a bear market in terms of index decline?
A period when securities in a key market index have fallen by at least 20%.
What is the foreign exchange market?
The global market where currencies are traded and their relative prices are determined.
What are three functions of the foreign exchange market?
It facilitates currency conversion, manages foreign-exchange risk, and allows speculation on currency movements.
What are the three main foreign-exchange markets?
The spot market, the forward market, and the futures market.
What does the International Monetary System comprise?
Money flows and governance institutions for currency and payment obligations.
What does the International Financial System comprise?
Return-bearing assets, financial institutions, markets, and related transactions.
What is financial disclosure?
The act of making a company's financial information available to users for informed decisions.
What are the three common financial statements?
The income statement, the balance sheet, and the statement of cash flows.
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