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AQA A-level Economics: Financial Markets 2024 Exam Questions and Answers
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AQA A-level Economics: Financial Markets 2024 Exam Questions and Answers
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AQA A-level Economics: FinancialMarkets 2024
Exam Questions and Answers
What system of exchange did money replace? - Answer>>
Money solves the problems created by the barter system. Instead
of having to find someone who had the goods you wanted and
wanted your goods, money could be used instead.
What are the 4 main functions of money? - Answer>> 1.
Medium of exchange - between buyer and seller
2. Deferred payment - it is a standard of deferred payment.
3. Unit of account
4. Store of value
What are the two types of money? - Answer>> 1. Narrow
money - money that is ready to be spent immediately, e.g. cash,
debit and credit cards.
2. Broad money - Broad money includes all of narrow money and
also money that is less accessible and can't be spent
immediately, like money in savings accounts, cheques or
government bonds.
What are financial markets? - Answer>> Financial markets are
any exchange that facilitates trading of financial instruments, such
as stocks, bonds and foreign exchange
What are the roles of financial markets in the UK economy? -
Answer>> 1. Facilitate savings - people can invest
savings/pensions into assets like shares/gov bonds. These can
help generate a 'return' on savings. Offering a secure place to
store money and earn interest.
, 2. Lend to businesses and individuals - financial markets provide
an intermediary between savers and borrowers.
3. To allocate funds for productive uses: they allocate capital to
where the risk-adjusted rate of return is highest.
4. Exchange of goods and services - contactless payment cards.
5. Provide forward markets - in currencies and commodities.
Forward markets allow agents to insure against price volatility.
6. Provide a market for equities - they can let people buy/sell
shares in companies. Also allow business to raise fresh equity to
fund their capital investment and expansion.
What are the three types of financial market? - Answer>>
Money market
Capital Market
Foreign exchange market
What is the money market? - Answer>> · Money market -
where you can buy and sell short-term financial assets, like
overdrafts. Includes inter-bank lending.
What is the capital market? - Answer>> · Capital market -
where you can buy and sell long-term financial assets, like large
business loans. To raise medium and long-term finance for
businesses/government.
o Borrowing takes place by issuing bonds and shares.
What is the foreign exchange market? - Answer>> · Foreign
exchange market - where you can buy and sell foreign currencies
like the American dollar. The spot exchange rate is the rate you
can purchase/sell currency at right now.
What is the contribution of the UK financial sector to the
economy? - Answer>> · In 2018, the financial service sector
contributed £132 bn to UK economy, 6.9% of total output. Sector
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