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Peoples feelings affect how they behave, the link between thoughts, feelings and behaviour is clear, and can be traced back to attitudes and so to our personal values, this is called the feedback affect and it's linked to expectations, expectations can be self-fulfilling - the feedback affect refers to the fact that peoples own attitudes mean that they affect the outcomes of events If people expect share price to rise, they'll start to sell their shares - if enough people sell them, the price will fall 1.6.1 - feedback effect + expectations If interest rates are expected to rise, people will save more money and borrow less - banks therefore have to pay out more interest and earn less from lending, and they may therefore raise interest rates in order to maintain the level of their income Buying a financial services product isn't the same as buying something that is quickly consumed, when someone purchases a financial product they're entering a relationship with a provider that has implications for a specific time period - this may be short-term but can also be medium / long-term, the customer must be aware of the implications because they bring with responsibilities and the customer must be able to afford to meet their obligations Financial eg's of the feedback effect in expectations lead events include: If people expect increased unemployment, they may save more for the future and reduce or delay spending. As a result, businesses need to produce fewer goods + services to meet demand, they then need fewer workers and so unemployment rises The best e.g. of the importance of affordability is borrowing money, financial customers shouldn't take on an amount of debt that's unaffordable when compared with their income and other expenses Financial decisions are made within the context of a persons particular value system and perceptions short-term borrowing- a person can know with a good deal of certainty whether or not they can afford to pay back the money. medium / long-term loan, they can't be so certain because circumstances might change Involves someone choosing to save in a way that means the money will be used for what the individual considers to be good purposes, so one person's opinion about what is ethical will differ from that of someone else Buying an insurance policy also involves considering affordability, some individual insurance policies (home/travel), aren't very expensive. Others like motor insurance for young people, are more costly Ethical investing 1.6.2 - influence of personal values of financial decisions A persons financial choices are affected not 1.6.3 - affordability - implications + resnonsibilities ...
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