Financial markets – flush with cash?
Late March saw the auctioning by the Bank of England of £10.9bn to boost liquidity in financial markets. This was £5bn more than had been expected and so should help ease the liquidity position for cash-strapped banks and other financial institutions.
When the rivers run dry The Economist (6/3/08)
Bank of England answers pleas with £5bn injections Times Online (21/3/08)
Questions
| 1. | Explain what is meant by liquidity. |
| 2. | Assess the main factors that have resulted in a shortage of liquidity in financial markets. |
| 3. | Discuss the extent to which this extra liquidity is likely to help reduce the likelihood of recession in the UK. |