What is the difference between risk and uncertainty?
Risks can be quantified whilst uncertainty is impossible to predict
1 of 10
What does uncertainty make it difficult to do?
For businesses and governments to plan for the future
2 of 10
What are shocks?
Unexpected events that cannot be predicted by have a significant effect on one or more economies
3 of 10
List some shocks that have taken place
The fall of commodity prices 2014-15, the financial crisis 2008-9, reunification of Germany 1990
4 of 10
What effect does uncertainty have on the economy?
It make businesses reluctant to invest and FDI slows
5 of 10
How can businesses insure against potential losses of volatile exchange rates?
By using forward markets
6 of 10
What are forward markets?
It makes it possible to buy a certain quantity or foreign currency at a price agreed today, for a delivery at a specific future date
7 of 10
What are the effects of forward markets?
It removes all uncertainty and allows businesses to plan ahead without fear of major changes of prices
8 of 10
What is insurance?
The principle by which risks are shared between all those who wish to protect themselves from unforeseen outcomes
9 of 10
How do insurance companies important to the economy?
They invest reserves of money to cover consumer risks; they buy government bonds and financial products and thus fun public and private sector projects; businesses can function because they are secured against anything that might threaten them
10 of 10
Other cards in this set
Card 2
Front
What does uncertainty make it difficult to do?
Back
For businesses and governments to plan for the future
Comments
No comments have yet been made