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Essay / Research Paper Abstract
This 6 page paper considers how liquidity is maintained in the UK economy. The paper outlines the way that the financial markets and intermediaries, such as banks and building societies in addition to the Bank of England are key in maintaining liquidity so that the transaction essential to an economy can continue. The paper focuses on the UK< but the theories are universal. The bibliography cites 5 sources.
Page Count:
6 pages (~225 words per page)
File: TS14_TEliquec.rtf
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Unformatted sample text from the term paper:
operate effectively in the short term there needs to be liquidity. This means that money needs to be able to move around the economy. This may be for the purchase
of goods, but also for investment and lending so that the facilitates needed to supply the demand may be developed and further increase the money supply movement. If liquidity
does not exist then the economy will slow down as both consumer and capital goods cannot be purchased, creating a decline and a recession. If the transactions that maintain an
economy cannot take place or are hampered then liquidity is lowered. Just as when this occurs in a business, this can be trouble for an economy. This then would become
a negative cycle and would be of difficult to break out of. The framework under which the economy operated with the banks and other institution acting as intermediaries and the
bank of England have the role of lender of last resort the liquidity is maintained (Nellis and Parker, 1996).. Financial markets are the
places where lenders and borrowers may come together in a mutually beneficial relationship. The lenders are in the business to make money by way of charging interest in the loan
of their funds whereas the borrowers are seeking to used the funds for their own reasons. However when we look at the financial markets were see that in the majority
of cases the lenders and borrowers are brought together by financial intermediaries and do not come together directly, and there are many reasons for this type of behaviour. Firstly, the
term financial intermediary need to be defined. The term intermediary means someone who is a go between, in financial terms this can
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