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Flashcards in The Financial Sector Deck (5)
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The roles of the financial sector? (5)

1. Saving
2. Lending
3. Reducing risk
4. Forward market in commodities


How does the financial market reduce risks?

Forward currency markets enable firms to buy foreign currency at a fixed price which gives firms more confidence to invest.


Market failures in the financial sector? (5)

1. Asymmetric information
2. Moral hazard
3. Speculation and market bubbles
4. Market rigging
5. Externalities


The functions for Central Banks? (5)

1. Monetary policy
2. Banker to the government
3. Lender of last resort
4. Printing money
5. Regulation of banking industry


How does the central bank act as the lender of last resort?

If the government runs out of money the central bank buys their debt, preventing panic.