Why study money banking and financial markets

Financial markets promote economic efficiency by
channeling funds from savers to investors
A key factor producing high economy growth is
Well functioning financial markets
The bond markets important because they are
The market where interest rates are determined
The stock market is important because
It is the most widely followed financial market in the United States
Stock
Represents a share of ownership in a corporation or a claim on a firm earning or assets. Stocks are part of wealth. Changes in their values affect people willingness to spend and thus their investment.
The bond market
Support economy but activity by and enabling government and corporation to borrow to undertake their projects. It is the market where interest rates are determined.
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Financial intermediation
Channeling funds from individuals with surplus funds to those desiring funds when the saver does not purchase the borrowers security
Financial crisis
A major disruption in the financial markets
Bank important to the study of money and that economy because
Have been a source of rapid innovation
Financial institutions search for
higher profits
Money is defined as
Anything that is generally accepted in payment for goods and services are in the repayment of debt
Business cycles
Upward and downward movements of aggregate output produced in economy
Sustained downward movement in the business cycle
recessions
Monetary theory
Relates changes in the quantity of money to changes in aggregate economic activity and the price level
Inflation
Continually raising price level
Inflation is always and everywhere
Monetary phenomenon
Monetary policy
The management of money and interest rates
Central bank
The organization responsible for the conduct of a nation monetary policy
Federal reserve system
The organization responsible for the conduct of monetary policy in the United States
Fiscal policy
Decisions about government spending and taxation
Budget deficit
The excess of government expenditures over tax revenues for a particular time
Budget surplus
Tax revenues exceed government expenditures
Gross domestic product
A measure of aggregate output
Foreign exchange market
Instrumental in moving funds between countries
Foreign exchange rate
Price of one country’s currency in term of another’s
Nominal GDP
Output measured in current price
Real GDP
Output measured in fixed price