Role of financial markets

A group of banks, including Barclays and JP Morgan, have been fined more than €1 billion by the EU’s competition authorities for rigging the foreign exchange market after the Global Financial Crisis of 2008. The EU found that traders at the banks had used online chat rooms to share information about customers’ orders, prices and other trading activities in order to manipulate the currency markets.

(Source: adapted from https://www.ft.com/content/73163fa0-77c5-11e9-bbad-7c18c0ea0201)

With reference to the information above, explain what is meant by ‘market rigging’.

Which one of the following is a role of financial markets?

To:

Using the data provided in Extract D, explain one role of financial markets.

Examine two reasons why retailers on the high street tend to remain small.

Discuss possible methods of price and non‑price competition that firms could use to increase the value of sales on the high street.

EITHER

Evaluate the microeconomic and macroeconomic effects of falling house prices.

Evaluate the microeconomic and macroeconomic effects of labour shortages in the UK, or a developed economy of your choice.

Write your answer here:

In May 2020, the UK government introduced a loan scheme to help small businesses survive the downturn in the economy. Small businesses could borrow up to £50 000 at an interest rate of 2.5% for up to 6 years from a bank. The government guaranteed 100% of the loans, to enable banks to issue them quickly, and only minimal checks were made on borrowers.

(Source: adapted from https://www.ft.com/content/1ca15db2-93e4-4e34-877d-110309cd9716)

With reference to the information above, explain one role of financial markets.

Which one of the following would be a risk if ‘only minimal checks were made on borrowers’ in this loan scheme?

With reference to Extract A, explain the role of forward markets in currencies.

With reference to Extract A and Figure 1, examine the likely impact of the change in the sterling exchange rate on the UK economy.

With reference to the last paragraph in Extract C, assess the impact of a fall in real incomes on subjective happiness.

With reference to Extract C, discuss the potential conflicts between macroeconomic objectives when the central bank attempts to control inflation.

Discuss whether providing substantial government financial support to banks is the best policy response during a financial crisis.

UK total bank lending to individuals, percentage change on previous year

Explain one likely reason why consumer demand for bank loans has increased.

Which one of the following is most likely to result from an increase in bank lending to individuals?

Calculate the index number for the total value of bank lending in 2016 using 2015 as a base year.

With reference to the information provided, explain the distinction between absolute poverty and relative poverty.

With reference to the information provided and your own knowledge, examine two factors that might explain the differing rates of decline in absolute poverty in East Asia and Sub-Saharan Africa.

With reference to Extract A, discuss two macroeconomic policies, apart from protectionism, that a government could use to reduce the negative effects of globalisation.

Assess the view that ‘some level of inequality is desirable to maintain an appropriate incentive structure in the economy’ (Extract B, lines 19 and 20).

Discuss the role of the financial sector in the growth and development of developing countries.