section 5 definitions

Question 1

What is narrow money?

Answer 1

Physical currency, as well as deposits and liquid assets in the central bank

Narrow money refers to the most liquid forms of money.

Question 2

What does broad money include?

Answer 2

The entire money supply, it includes liquid and less liquid assets

Broad money encompasses a wider range of financial instruments.

Question 3

Define financial market.

Answer 3

When buyers and sellers can buy and trade a range of services or assets that are fundamentally monetary in nature

Financial markets facilitate the exchange of financial assets.

Question 4

What does the Harrod-Domar model explain?

Answer 4

Savings provide the funds that are used for investment, and growth rates depend on the level of saving and the productivity of investment

This model suggests that growth in developing countries is limited by the lack of investment.

Question 5

What is microfinance?

Answer 5

Schemes which aim to give poor and near-poor households permanent access to a range of financial services

Microfinance helps improve financial inclusion for low-income individuals.

Question 6

What are central banks responsible for?

Answer 6

Control the money supply and monetary policy, manage gold reserves and foreign currency, and issue government debt

Central banks play a crucial role in a country’s economy.

Question 7

Define recession.

Answer 7

Two consecutive quarters of negative economic growth

A recession indicates a significant decline in economic activity.