Banking
Our Nation's central bank
What is the People's Bank of China
Allows wealth to be stored in the form of money over time
What is store of value?
Money needs to be accepted by everyone in an economy if it is going to be used to facilitate the exchange of goods and services.
What is acceptance?
In most countries only the central bank can issue notes. Coins are normally minted, or produced, by the government, but are issued through the central bank.
What is 'To issue notes and coins?
Anything that is generally accepted as a means of payment for goods and services
what is money?
This acts as a value of money
What is money?
Enables people to borrow money and pay itback at a later date
What is Standard for deferred payment?
Money in an economy needs to be able to be divided into smaller units so that a range of prices can be offered for goods and services.
What is divisible?
The central bank keeps the revenue raised by the government and makes payments on its behalf. It also issues short-term and long-term government debt in order to raise extra funds for the government.
What is 'To act as banker to the government?'
The act of trading goods or services between two or more parties without the use of money
What is barter system?
A general rise in price and a fall in the purchasing value of money
What is inflation?
Anything that sets value of goods and services and isacceptable to all parties involved inatransaction
what is Medium of exchange?
It is essential that every coin or note of a particular value used in an economy is the same. This is why coins have milled edges or special shapes and why bank notes have features such as watermarks, pictures or metal threads so the user has confidence in its value.
What is uniformity?
The central bank regulates the behaviour of commercial banks, including holding cash reserves equal to a set percentage of their total deposits. It also acts as lender of last resort to the commercial banks.
What is 'To act as banker to commercial banks?'
The bank of the government which is responsible for controlling a country’s money supply, issuing notes and coins and setting the rules commercial banks must follow
What is Central bank?
Payment made as a fee for borrowing or investing money
What is interest?
The idea that money allows the value of different goods and services to be compared
What is Measure of value or unit of account?
Money needs to last for a reasonable amount of time ifitisto be accepted.
What is the characteristic of durability?
The central bank manages the country’s foreign exchange reserves and, depending on the foreign exchange system used by the country, intervenes in the foreign exchange market to influence the value of its currency.
What is 'To manage reserves of foreign currency?'
A financial institution in which individuals and firms can save their money and also obtain loans
What is Commercial bank?
Commodity money
Fiat Money
Fiduciary Money
What are the types of money?
Money allows value to be transferred from one person to another and across time and place.
What is Transferring Value?
It is important that money has a reasonable degree of stability of value or there will be a loss of confidence. However, inflation will diminish the value over time.
What is stability of value?
The central bank decides the base rate from which other interest rates are set. If the central bank wishes, for example, to encourage borrowing and spending, it will reduce its base rate (or bank rate) which will usually be followed by the commercial banks lowering their interest rates.
What is 'To control monetary policy?'
This is where a central bank buys financial assets from banks and other private sector businesses with new electronically created money
What is Quantitative easing (QE)?