Financial markets and monetary policy

• Bank of England: Central bank in the UK economy, which is in control of monetary policy.
• Rate of interest: The reward for saving and the cost of borrowing.
• Bond: Debt; represents money that must be paid back over a period of time.
• Broad money: Money held in banks and building societies but that is not immediately accessible.
• Repo rate: Rate at which the central bank can lend money to commercial banks.
• Reserve currency: Foreign currency held in a country's official reserves due to its value as a medium of exchange.
• Default: The failure or inability to meet the legal minimum requirements of a loan.
• Reverse repo rate: Rate at which the central bank can borrow money from commercial banks.
• Share: Equity; represents entitlement to a portion of a firm's profits via dividends.
• Transmission mechanism of monetary policy: The process by which alterations to the base rate affect determinants of aggregate demand.
• Expansionary monetary policy: Monetary policy implemented to increase aggregate demand.
• Financial sector: Firms that provide financial services.
• Interest: Money paid to a lender by a borrower.
• Money supply: Stock of money in the economy, comprised of cash and bank deposits.
• Narrow money: Physical money and more liquid assets.