In this chapter, you will learn to: Describe the role of financial intermediaries, differentiate between bonds and stocks and show why their prices are inversely related to interest rates, explain how the financial system improves the allocation of saving to productive uses, discuss the three functions of money and how the money supply is measured, analyze how the lending behavior of commercial banks affects the money supply, explain how the central bank controls the money supply and its relation to inflation in the long run.
