Money & Banking
Assignment on Blackboard: Due January 24
Bond market: the market where interest rates are determined
Lending someone the use of your dollars for a specific time period
Bonds are debts that have to be paid back
Interest rates
Rates tend to move in the same direction
Stock market: most widely followed financial market
Share of stock is a share of ownership in a corporation
Stock is always in existence as the corporation exists
Consumers care about what is going in the stock market because it is a reflection of the health of the economy
If economy is doing better, we are more likely to buy things
Financial intermediaries: institutions that channel funds from savers to investors
Banks
Insurance companies
Financial crises: major disruptions in financial markets that are characterized by sharp declines in asset prices and the failures of many financial and nonfinancial firms
Financial innovation: banks today are very different than they were before
ATMs
Credit card such as Mastercard and Visa
Money: anything that Is generally accepted in payment for goods and/or services or in the repayment of debts
Money and wealth are not the same
Business cycle: the up and down movement of aggregate output in the economy
Before a recession, there is a downturn in the money growth rate but there is no measure that ties the business cycle to the money growth rate
Price level: the average price of goods and services in tan economy
CPI
PCE
Inflation: the continual increase in the price level
Deflation: decrease in the price level
For the aggregate economy, deflation is bad
Harder to pay back debts
Disinflation: still have inflation, but its not as high as it was
If you grow your money growth rapidly for a long period of time, you are going to have higher inflation
Monetary policy: management of money supply and interest rates
The Federal Reserve is responsible for conducting monetary policy
Treasury is responsible for paying the government’s bills such
Bond market: the market where interest rates are determined
Lending someone the use of your dollars for a specific time period
Bonds are debts that have to be paid back
Interest rates
Rates tend to move in the same direction
Stock market: most widely followed financial market
Share of stock is a share of ownership in a corporation
Stock is always in existence as the corporation exists
Consumers care about what is going in the stock market because it is a reflection of the health of the economy
If economy is doing better, we are more likely to buy things
Financial intermediaries: institutions that channel funds from savers to investors
Banks
Insurance companies
Financial crises: major disruptions in financial markets that are characterized by sharp declines in asset prices and the failures of many financial and nonfinancial firms
Financial innovation: banks today are very different than they were before
ATMs
Credit card such as Mastercard and Visa
Money: anything that Is generally accepted in payment for goods and/or services or in the repayment of debts
Money and wealth are not the same
Business cycle: the up and down movement of aggregate output in the economy
Before a recession, there is a downturn in the money growth rate but there is no measure that ties the business cycle to the money growth rate
Price level: the average price of goods and services in tan economy
CPI
PCE
Inflation: the continual increase in the price level
Deflation: decrease in the price level
For the aggregate economy, deflation is bad
Harder to pay back debts
Disinflation: still have inflation, but its not as high as it was
If you grow your money growth rapidly for a long period of time, you are going to have higher inflation
Monetary policy: management of money supply and interest rates
The Federal Reserve is responsible for conducting monetary policy
Treasury is responsible for paying the government’s bills such