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Week 5: Money, prices and the Reserve Bank (Bonds (The coupon rate depends…
Week 5: Money, prices and the Reserve Bank
The financial system
Provides information to savers about possible uses of, and returns to their funds
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The banking system
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evaluating the quality of borrowers and direct funds to higher- returns investment on the behalf of savers
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Stocks
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Risk premium: the rate of return that financial investors require to hold risky assets - the rate of returns on safe assets
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Money supply
Bank reserves: assets held by bank to cover withdrawals from depositors and cheques written on their accounts
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Money and prices
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Velocity: A measure of the amount of expenditure that can be financed from a given amount of money over a particular time period
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