PAPER 3 ECONOMICS

Narrow money meaning

Narrow money is cash and money in current accounts (basically money which is ready to be spent immediately).

Broad money

Broad money includes all of narrow money (cash and money in current accounts) and money that is less accessible like savings accounts, investments or government bonds. 

It is money that can be spent but is harder to access and can’t be spent immediately.

Financial markets

Money market

Capital market

Foreign Exchange market

Money Market

Can buy and sell short-term financial assets like overdrafts

Capital Market

Can buy and sell long-term financial assets like large business loans

Foreign Exchange Market

Can buy and sell foreign currencies

corporate bond

debt security issued by a company to raise capital for purposes like expansion, acquisitions, or debt refinancing

Investment banks

Make investments. Invested into spotify and uber while it was still small

Can also write merger contracts for companies who want to merge. For example orange and t-mobiles merge

In 2025 had 1.6 trillion in assets

Commericial banks

Commercial banks are banks which deal with ordinary, everyday stuff like putting in money into a savings account, taking out a mortgage and withdrawingcash. Natwest, Barclays, Halifax are all examples of commercial banks. Goldman Sachs is an example of an investment bank.

Assets

Money the bank has

money and loans lent out

Libalilities

Money the bank owes

can include deposits

Bank Balance sheet

financial snapshot showing what a bank owns (assets), what it owes (liabilities), and its net worth (equity) at a specific time

FPC (Financial Policy Commitee