Download Money and Banking

Survey
yes no Was this document useful for you?
   Thank you for your participation!

* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project

Document related concepts

History of the Federal Reserve System wikipedia , lookup

Investment management wikipedia , lookup

Financial literacy wikipedia , lookup

Present value wikipedia , lookup

Stock trader wikipedia , lookup

Quantitative easing wikipedia , lookup

Interest rate wikipedia , lookup

Global financial system wikipedia , lookup

Interest rate ceiling wikipedia , lookup

Money supply wikipedia , lookup

Shadow banking system wikipedia , lookup

Financial crisis wikipedia , lookup

Interbank lending market wikipedia , lookup

Financialization wikipedia , lookup

Transcript
Money and Banking
Chapter 1:
Why Study Money, Banking, and Financial
Markets?
- Financial Markets: (stock, bonds, foreign
exchange…)
- Financial institutions: (banks, insurance
companies…)
- How financial markets affect our daily life?
- How financial markets affect our economy?
- The effect on other economies?
The importance of Money in the economy.
1
1- Why Study Financial Markets?
Markets in which funds are transferred:
(excess funds – shortage of funds)
A- Bonds and Stock markets: channeling funds
from savers to investors, thereby promoting
economic efficiency.
- The bond market and the interest rate:
A security (financial instrument): a claim on the
issuer’s future income or assets.
A bond is debt security that promises to make
payments periodically for a specific period of
time.
Governments and corporations use bonds to
finance (borrow) their activities, therefore, it
affects the interest rate:
The interest rate is the cost of borrowing funds.
The effect of the level of interest rate on the
personal level and on the economy.
2
B-The Stock Market:
A stock is a share of ownership in a corporation.
It is a security (claim on earnings and assets)
Issuing a stock and selling it to finance a firm’s
activity.
2- The Foreign Exchange Market:
To convert funds from one currency to another,
we use the FEM.
Foreign exchange rate: the price of one
country’s currency in terms of another’s is
determined in the FEM.
What are the results of fluctuations on the
economy?
Affects the consumers and the private sector:
- Weaker KD leads to more expensive foreign
goods
- Stronger KD means more expensive exports
3
2- Why Study Banking and Financial
Institutions?
- Banks and other financial institutions are
what make financial institutions work.
- Without them, cannot move funds from
people with excess funds to people with
shortage of funds.
Allocations towards productive investment
opportunities.
A- Structure of the Financial System:
Transactions are made through Financial
Intermediaries: institutions that borrow funds
from people who have excess funds and in turn
make loans to people with shortage of funds.
B- Banks and other Financial Institutions:
How they manage their assets and liabilities to
make profits? Why they are regulated? What
are the financial innovations? (ATM, banking
online)
4
3- Why Study Money and Monetary Policy?
Money (Money Supply): is anything that is
generally accepted in payment for goods and
services or in the repayment of a debt.
- What is the role/effect of money in the
economy?
- Historical view
A- Money and Business Cycle:
A positive relation?
B- Money and Inflation:
Aggregate price level – Inflation rate
A positive relation?
C- Money and Interest Rate:
A clear relation?
D- Conduct of Monetary Policy:
Money affects many economic variables, its
important to the wellbeing of the economy and
the people.
Therefore, Monetary policy: the management of
money and interest rates (quantity of money), is
conducted by the central bank.
5