Tutorial Essay

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Tutorial 2 questions 1.1 Explain the key roles of the financial system. Why is it so important to the broader economy to have an efficient and effective financial system? 1.8 What impact did the GFC have on the global financial system? What will the long-term implications be for the members of the sector? 1.17. Discuss three forms of financial market efficiency. Why is it important that financial markets be efficient? 1.19. In recent years, the level of personal debt held by the average Australian has risen dramatically. This is largely the result of extremely low interest rates, low inflation and relatively easy access to debt. In addition, the rapid increase in house prices in recent years has led to larger average mortgages and has also provided those already in the market with access to a relatively cheap source of finance in mortgage equity loans. These have been used for a variety of purposes, including to invest, to purchase consumer assets such as boats and cars and even to fund holidays. A further issue is the continued love affair with credit cards and personal debt, such as those well-marketed ‘interest-free’ deals, which have attracted many consumers. This has been causing a deal of concern within government and other organisations. The RBA has suggested that this may even be influencing monetary policy. (a) Review recent publications to determine the extent of this problem. (b) Assess what the government is doing to curb this ‘spending spree’? Is there anything else that could be done? (c) Do you think this is a critical issue for the continued stability and growth of the Australian financial sector and general economic growth? (d) Does the GFC help or hinder

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