Chapter 1 - Introducing money, banking, and financial markets. In this chapter you will learn to see the importance of money, banking, and financial markets; understand possible careers that use the skills and knowledge gained through studying this topic. | Chapter 1 Introducing Money, Banking, and Financial Markets Copyright © 2009 Pearson Addison-Wesley. All rights reserved. Learning Objectives • See the importance of money, banking, and financial markets • Understand possible careers that use the skills and knowledge gained through studying this topic Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 1-2 Introduction of Concepts • Financial Markets/Institutions – Bringing together of buyers and sellers of financial securities to establish prices – The formal setting/mechanism that brings buyers and sellers together to value financial assets – Provides a mechanism for those with excess funds (savers) to lend to those who need funds [borrowers] – Includes banks, savings and loans, credit unions, investment banks and brokers, mutual funds, stock and bond markets Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 1-3 1 Introduction of Concepts (Cont.) • Money – “Lubricant that greases the wheels of economic activity” – Not just limited to currency (bills and coins)—also includes demand deposits (checking accounts) issued by banks – Plays a key role in influencing the behavior of the economy as a whole and the performance of financial institutions and markets Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 1-4 Introduction of Concepts (Cont.) • Money (Cont.) – More broadly the monetary economy • Facilitates transactions within the economy • Principal mechanism through which central banks attempt to influence aggregate economic activity – Economic Growth – Employment – Inflation Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 1-5 Introduction of Concepts (Cont.) • Banking – Banks and other financial intermediaries take funds from one group (savers) and re-deploy these funds by investing or lending (borrowers) – Banks provide a place where individuals and businesses can invest their funds to earn interest with a minimum of risk – Well-equipped to invest in
