(BQ) Part 2 book "Brief principles of macroeconomics" has contents: The basic tools of finance, the monetary system, money growth and inflation, a macroeconomic theory of the open economy, aggregate demand and aggregate supply, the influence of monetary and fiscal policy on aggregate demand,.and other contents. | Find more at The Basic Tools of Finance 9 S ometime in your life, you will have to deal with the economy’s financial system. You will deposit your savings in a bank account, or you will take out a mortgage to buy a house. After you have a job, you will decide whether to invest the funds in your retirement account in stocks, bonds, or other financial instruments. If you try to put together your own portfolio, you will have to decide between buying stocks in established companies such as General Electric or newer ones such as Google. And whenever you watch the evening news, you will hear reports about whether the stock market is up or down, together with the often feeble attempts to explain why the market behaves as it does. If you reflect for a moment on the many financial decisions you will make during your life, you will see two related elements in almost all of them: time and risk. As we saw in the preceding two chapters, the financial system coordinates the economy’s saving and investment, which in turn are crucial determinants of economic growth. Most fundamentally, the financial system concerns decisions and actions we undertake today that will affect our lives in the future. But the 177 577 11/12/10 7:18 PM Find more at 178 PART IV THE REAL ECONOMY IN THE LONG RUN finance the field that studies how people make decisions regarding the allocation of resources over time and the handling of risk future is unknown. When a person decides to allocate some saving, or a firm decides to undertake an investment, the decision is based on a guess about the likely result. The actual result, however, could end up being very different from what was expected. This chapter introduces some tools that help us understand the decisions that people make as they participate in financial markets. The field of finance develops these tools in great detail, and you may choose to take .
