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.

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

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