Chapter 2 - Financial assets, money, financial transactions, and financial institutions. In this chapter, You will see the most important channels through which funds flow from lenders to borrowers and back again within the global system of money and capital markets, you will discover the nature and characteristics of financial assets how they are created and destroyed by decision makers within the financial system, you will explore the critical roles played by money within the financial system and the linkages between money and inflation in the prices of goods and services. | Chapter 2 Financial Assets, Money, Financial Transactions, and Financial Institutions Learning Objectives To learn about the channels through which funds flow between lenders and borrowers within the global system of money and capital markets. To discover the nature and characteristics of financial assets – how they are created and destroyed by decision-makers within the financial system. Learning Objectives To explore the critical roles played by money within the financial system and the linkages between money and inflation in the prices of goods and services. To examine the important functions carried out by financial intermediaries in lending and borrowing and in creating and destroying financial assets. Introduction: The Role of Financial Assets The financial system is the mechanism through which loanable funds reach borrowers. Through the operation of the financial markets, money is exchanged for financial claims in the form of stocks, bonds, and other securities, thereby | Chapter 2 Financial Assets, Money, Financial Transactions, and Financial Institutions Learning Objectives To learn about the channels through which funds flow between lenders and borrowers within the global system of money and capital markets. To discover the nature and characteristics of financial assets – how they are created and destroyed by decision-makers within the financial system. Learning Objectives To explore the critical roles played by money within the financial system and the linkages between money and inflation in the prices of goods and services. To examine the important functions carried out by financial intermediaries in lending and borrowing and in creating and destroying financial assets. Introduction: The Role of Financial Assets The financial system is the mechanism through which loanable funds reach borrowers. Through the operation of the financial markets, money is exchanged for financial claims in the form of stocks, bonds, and other securities, thereby transforming savings into investment so that the economy can grow. The Creation of Financial Assets A financial asset is a claim against the income or wealth of a business firm, household, or unit of government, represented usually by a certificate, receipt, computer record file, or other legal document, and usually created by or related to the lending of money. Characteristics of Financial Assets Financial assets are sought after because they promise future returns to their owners and serve as a store of value (purchasing power). Characteristics of Financial Assets They do not depreciate like physical goods, and their physical condition or form is usually not relevant in determining their market value. They have little or no value as a commodity and their cost of transportation and storage is low. Financial assets are fungible – they can easily be changed in form and substituted for other assets. Different Kinds of Financial Assets Any financial asset that is generally accepted in
