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Why Study Financial Markets? Excess funds = > Shortage of funds

Why Study Financial Markets? Excess funds = > Shortage of funds Promoting economic efficiency, productive use of funds Markets: Bond (IOU’s), Stock (ownership claim), FOREX (currencies) Why Study Banking and Financial Institutions?

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Why Study Financial Markets? Excess funds = > Shortage of funds

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  1. Why Study Financial Markets? • Excess funds = > Shortage of funds • Promoting economic efficiency, productive use of funds Markets: Bond (IOU’s), Stock (ownership claim), FOREX (currencies) Why Study Banking and Financial Institutions? (banks, insurance companies, mutual funds, investment banks, etc.) 1. Financial Intermediation 2. Banks and Money Supply 3. Financial Innovation Why Study Money and Monetary Policy? • What is Money? • Influence on business cycles, inflation, and interest rates, unemployment, aggregate output. • FED, Monetary & Fiscal policy

  2. Bond Market

  3. Stock Market

  4. Foreign Exchange Market

  5. Money and Business Cycles

  6. Money and the Price Level

  7. Money Growth and Inflation

  8. Money Growth and Interest Rates

  9. Fiscal Policy and Monetary Policy

  10. Appendix: Definitions Aggregate Output Gross Domestic Product (GDP) = Value of all final goods and services produced in domestic economy during year Aggregate Income Total income of factors of production (land, capital, labor) during year Distinction Between Nominal and Real Nominal = values measured using current prices Real = quantities, measured with constant prices Aggregate Price Level nominal GDP GDP Deflator = real GDP $10 trillion GDP Deflator = = 1.11 $9 trillion Consumer Price Index (CPI) price of “basket” of goods and services

  11. Appendix: Definitions Growth Rates and the Inflation Rate

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