Studying Money and Banking
W?
Study Money and Banking?
CHAPTER 1
WHY STUDY MONEY AND BANKING?
What is Money and Banking?
It is a means and method of allocating and reallocating resources
The means is what we call Money
The method is called Banking or the Financial System
The Financial system
Comprises of
• Financial Markets
• Financial intermediaries
Why Study Financial Markets?
• Financial Markets channel funds from savers(lenders) to investors(borrowers).
• A method of acquiring personal wealth, hence effecting the behavior of firms.
Lenders are people who have available funds in excess of their desired expenditures that they are attempting to loan out,
Borrowers are people who have a shortage of funds relative to their desired expenditures who are seeking to obtain loans. Borrowers attempt to obtain funds from lenders by selling to lenders newly issued claims against the borrowers' real assets, i.e., by selling the lenders newly issued financial assets.
Financial Markets
A financial market is a market in which financial assets are traded.
In addition to enabling exchange of previously issued financial assets, financial markets facilitate borrowing and lending by facilitating the sale of newly issued financial assets.
Examples of financial markets include the New York Stock Exchange (resale of previously issued stock shares), the U.S. government bond market (resale of previously issued bonds), and the U.S. Treasury bills auction (sales of newly issued T-bills).
A financial institution is an institution whose primary source of profits is through financial asset transactions. Examples of such financial institutions include discount brokers , banks, insurance companies
An asset is anything of durable value, that is, anything that acts as a means to store value over time.
Real assets are assets in physical form (e.g., land, equipment, houses,...), including "human capital" assets embodied in people (natural abilities, learned
Study Money and Banking?
CHAPTER 1
WHY STUDY MONEY AND BANKING?
What is Money and Banking?
It is a means and method of allocating and reallocating resources
The means is what we call Money
The method is called Banking or the Financial System
The Financial system
Comprises of
• Financial Markets
• Financial intermediaries
Why Study Financial Markets?
• Financial Markets channel funds from savers(lenders) to investors(borrowers).
• A method of acquiring personal wealth, hence effecting the behavior of firms.
Lenders are people who have available funds in excess of their desired expenditures that they are attempting to loan out,
Borrowers are people who have a shortage of funds relative to their desired expenditures who are seeking to obtain loans. Borrowers attempt to obtain funds from lenders by selling to lenders newly issued claims against the borrowers' real assets, i.e., by selling the lenders newly issued financial assets.
Financial Markets
A financial market is a market in which financial assets are traded.
In addition to enabling exchange of previously issued financial assets, financial markets facilitate borrowing and lending by facilitating the sale of newly issued financial assets.
Examples of financial markets include the New York Stock Exchange (resale of previously issued stock shares), the U.S. government bond market (resale of previously issued bonds), and the U.S. Treasury bills auction (sales of newly issued T-bills).
A financial institution is an institution whose primary source of profits is through financial asset transactions. Examples of such financial institutions include discount brokers , banks, insurance companies
An asset is anything of durable value, that is, anything that acts as a means to store value over time.
Real assets are assets in physical form (e.g., land, equipment, houses,...), including "human capital" assets embodied in people (natural abilities, learned