theme 4

Question 1

explain one role of financial markets (2)

Answer 1

to mobilise savings (1) for individuals to invest or consume

Question 2

explain one reason why the UK central bank used quantitative easing following the Global Financial Crisis of 2008 (2)

Answer 2

to stimulate growth (1) by increasing money supply (1)

prevent deflation (1) by increasing money supply (1)

increase bank liquidity (1) so they are more willing to lend (1)

Question 3

explain the role of forward markets in currencies

Answer 3

firms agree on a fixed price for purchase of foreign currency in the future/ buy their currencies in advance. (K)

enables firms to reduce risk and can be certain about the cost of their imports in £ (AN)