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Questions and Answers
What is the primary objective of the Bangko Sentral ng Pilipinas (BSP) as stated in R.A. 7653?
What is the primary objective of the Bangko Sentral ng Pilipinas (BSP) as stated in R.A. 7653?
Which term refers to the function of the BSP as a lender of last resort?
Which term refers to the function of the BSP as a lender of last resort?
How does the Philippine financial or monetary system transfer funds between savers and borrowers?
How does the Philippine financial or monetary system transfer funds between savers and borrowers?
What are the main classifications of banks in the Philippines according to the text?
What are the main classifications of banks in the Philippines according to the text?
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Which type of institutions are considered part of the thrift bank classification in the Philippine financial system?
Which type of institutions are considered part of the thrift bank classification in the Philippine financial system?
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What is the formula for the Money Multiplier (mm) given a required reserve ratio (rr)?
What is the formula for the Money Multiplier (mm) given a required reserve ratio (rr)?
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How do financial institutions like banks contribute to economic growth?
How do financial institutions like banks contribute to economic growth?
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Which institution is NOT classified as a non-bank financial institution in the text?
Which institution is NOT classified as a non-bank financial institution in the text?
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How does the Money Multiplier relate to changes in the money supply?
How does the Money Multiplier relate to changes in the money supply?
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Which characteristic of financial institutions is crucial for providing users with flexibility and divisibility of funds?
Which characteristic of financial institutions is crucial for providing users with flexibility and divisibility of funds?
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How have international monetary institutions affected the Philippine monetary system?
How have international monetary institutions affected the Philippine monetary system?
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What is the main function of commodity money in an economy?
What is the main function of commodity money in an economy?
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What does 'face value' of paper bills refer to?
What does 'face value' of paper bills refer to?
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What did specialized bankers offer to businessmen and traders according to the text?
What did specialized bankers offer to businessmen and traders according to the text?
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What evolved with the developments in commerce and industry based on the text?
What evolved with the developments in commerce and industry based on the text?
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According to John Maynard Keynes, what is the 'transaction motive' for holding money?
According to John Maynard Keynes, what is the 'transaction motive' for holding money?
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What is one of the motives for holding money according to John Maynard Keynes, apart from the transaction motive?
What is one of the motives for holding money according to John Maynard Keynes, apart from the transaction motive?
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Study Notes
Evolution of Money
- Commodity money was used as a medium of exchange, where people used commodities such as salt, carabao, and shells.
- The use of commodity money was followed by the use of paper bills, which have a face value that refers to the amount of goods and services that can be bought with it.
Banking System
- Specialized bankers offered safekeeping services for a fee, and later discovered that they could lend a portion of the surplus money to other people who needed funds and charge an interest in return.
- The system of fractional reserve banking evolved over time, allowing banks to lend a portion of the deposited money.
Demand for Money
- The demand for money refers to the amount of goods and services that money can buy.
- According to John Maynard Keynes, there are three motives for holding money:
- Transaction motive: holding money to enable people and firms to pay for daily transactions.
- Loan motive: holding money for loan purposes.
- Speculative motive: holding money for speculative purposes.
Financial Institutions
- Financial institutions are important because they:
- Allocate or channel savings efficiently from savers to borrowers.
- Provide information, liquidity, and risk-sharing services.
- Provide flexibility and divisibility of funds for users and sources of funds.
- Are essential for ensuring capital formation and economic growth.
- Non-bank institutions include:
- Contractual savings institutions (e.g. insurance companies).
- Investment institutions.
- Securities market institutions (e.g. securities brokers and dealers, lending investors, organized exchanges).
- Credit card companies.
- Pawnshops.
Money Creation
- The Money Multiplier is the factor by which the money supply will change given a change in the monetary base or deposit.
- The formula for the Money Multiplier is: mm = 1 / rr.
- The formula for the Change in Money Supply is: M = mm x M.
International Monetary Institutions and the Philippine Monetary System
- The Philippine monetary system has been affected by international monetary institutions, particularly the International Monetary Fund (IMF) and the World Bank (WB).
- The Bangko Sentral ng Pilipinas (BSP) was established on June 14, 1993, as a central monetary authority.
- The primary objectives of the BSP are:
- To maintain price stability (or fight inflation).
- To promote and maintain monetary stability and convertibility of the peso.
- The BSP is also a lender of last resort, providing necessary funds to ailing or bankrupt banks.
Philippine Financial System
- The Philippine financial system is a network of markets and institutions that transfer funds from individuals and groups who save money to individuals and groups who want to borrow money.
- Banks are classified into:
- Universal and commercial banks.
- Rural banks.
- Thrift banks, which include:
- Savings and mortgage banks.
- Private development banks.
- Micro-finance institutions.
- Stock savings.
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Description
Test your knowledge on the history and objectives of the Bangko Sentral ng Pilipinas (BSP) established through R.A. 7653 on June 14, 1993. Learn about its role in maintaining price stability, promoting monetary stability, and acting as the lender of last resort for ailing banks.