TAILIEUCHUNG - Lecture Introduction to finance: Markets, investments, and financial management (14th edition): Chapter 2 - Melicher, Norton

Chapter 2 - Money and the monetary system. This chapter includes contents: Describe the three ways in which money is transferred from savers to businesses, identify the major components of the monetary system, describe the functions of money, give a brief review of the development of money in the .,. | Chapter 2 Money and the Monetary System © 2011 John Wiley and Sons Chapter Outcomes Describe the three ways in which money is transferred from savers to businesses Identify the major components of the monetary system Describe the functions of money Give a brief review of the development of money in the . Chapter Outcomes (Continued) Describe major types of money market securities Briefly explain the M1, M2, and M3 definitions of the money supply Explain possible relationships between money supply and economic activity Comment on developments in the international monetary system Process of Moving Savings into Investments Surplus Economic Unit: generates more money than it spends resulting in excess money Deficit Economic Unit: generates less money than it spends resulting in a need for additional money Savings-Investment Process Money Securities Money Money Money Money Securities Firm’s Securities Securities Institution Securities Investment Banking Firm Direct Transfers: Savers Business Firm Indirect Transfers: Savers Business Firm Savers Financial Business Institution Firm Participants in the . Monetary System CENTRAL BANK: Defines and Regulates Money Supply Facilitates the Transferring of Money BANKING SYSTEM: Creates Money Transfers Money Provides Financial Intermediation Processes/Clears Checks The . Monetary System Central Bank Federal Reserve System Board of Governors Federal Reserve Banks Defines and regulates money supply Facilitates transfer of money through check processing/clearing Banking System: 1. Creates money 2. Transfers money 3. Provides financial intermediation 4. Processes/clears checks Other Banks First Bank Last Bank . Central Bank Federal Reserve System [often referred to as the “Fed”] Board of Governors Federal Reserve Banks Central Bank Activities Defines and regulates money supply Facilitates the transferring of money through check processing and clearing Importance and Functions of Money .

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