4.2.4.1 Structure of financial markets

Cards (12)

What are the four functions of money?
A medium of exchange, a store of value or wealth, a unit of account and a standard for deferred payments
What are the six characteristics of money?
Durability, Portability, divisibility, acceptability, scarcity and security
What is the money supply?
The total amount of money in the economy at a particular time
What is narrow money?
The basic amount of notes and coins and operational deposits / reserve balances at the Bank of England
What is narrow money approximately equal to?
The amount of cash in circulation
What is broad money?
All notes and coins and deposits in savings accounts and other less liquid assets
What is liquidity?
The ease and speed that an asset can be turned into cash
What is an example of an illiquid asset?
Property
What is the most liquid asset?
Cash
What is the Money Market?
Short term (usually 24 hours to 12 months) finance to individuals, firms and governments.
What does the Money Market include?
Interbank lending and purchasing of Treasury Bills
The Money Market is more liquid so there is less risk