Chapter 1- Why study Money‚ Banking and Financial Markets? Why are Financial Markets Important? Financial markets are crucial to promoting greater economic efficiency by channeling funds from people who do not have a productive use for them to those who do. Well functioning financial markets are a key factor in producing high economic growth‚ and poorly performing financial markets‚ vice versa. Financial markets and intermediaries have the basic function of getting people together by moving funds
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How the Quantity of Money is Controlled The quantity of money available is called the money supply. In an economy that uses commodity money‚ the money supply is the quantity of that commodity. In an economy that uses fiat money‚ such as most economies today‚ the government controls the supply of money: legal restrictions give the government a monopoly on the printing of money. Just as the level of taxation and the level of government purchases are policy instruments of the government‚ so is the
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Supply of Money There are several definitions of the supply of money. M1 is narrowest and most commonly used. It includes all currency (notes and coins) in circulation‚ all checkable deposits held at banks (bank money)‚ and all traveler’s checks. A somewhat broader measure of the supply of money is M2‚ which includes all of M1 plus savings and time deposits held at banks. An even broader measure of the money supply is M3‚ which includes all of M2 plus large denomination‚ long-term time deposits—for
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This essay will explain and illustrates the key mechanism behind the money multiplier and explore how monetary authorities can influence its size and affect the money supply in the economy. Firstly‚ an introduction on money measure will be presented. Secondly‚ the mechanism behind money multiplier will be presented by using equations to explain the cyclical changes in the multiple factor. Thirdly‚ the examination of the money multiplier in the current economic climate will be put forward. Fourthly
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The Role of Money in the U.S. Economy If you ask the average person what money is‚ you are undoubtedly going to receive some very strange looks. Money is a concept that many people take for granted. We know that money allows us to acquire goods and services‚ but what is its source of value? Money is paper‚ which is for all practical purposes; no different than the paper this text is written on. How then would anyone in his or her right mind trade a tangible object (like a new stereo or television)
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Creation of Money and Monetary Policy In society‚ there are many interesting topics of discussion amongst individuals and groups‚ either in the private or public sector. However‚ there is one inescapable subject we all fall prey to‚ which is money. We have a love‚ hate relationship with money that dictates almost everything we do‚ or at least‚ strive to do. Money‚ a powerful force to reckon with‚ establishes our buying power‚ or lack there of‚ to the point where lifestyle choices might be
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Money market bangladesh? Network of banks‚ discount houses‚ institutional investors‚ and money dealers who borrow and lend among themselves for the short-term (typically 90 days). Money markets also trade in highly liquid financial instruments with maturities less than 90 days to one year (such as bankers’ acceptance‚ certificates of deposit‚ and commercial paper‚ and government securities with maturities less than three years (such as treasury bills‚ foreign exchange‚ and bullion. Unlike organized
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International Money Transfer in Nigeria (Kester Osahenye) Introduction With an estimated 145 million inhabitants (Nigerian Population Census December 2006)‚ Nigeria is unarguably the most populous country in Africa. Since the emergence of the nascent democracy‚ Nigeria now plays a pivotal role in African migrations. As Africa’s economic giant‚ Nigeria has also become increasingly involved in international migration to Europe‚ the US‚ the Gulf countries and South Africa. Yet Nigeria is a source
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following is not a characteristic of money market instruments? a. short term to maturity b. small denominations c. low default risk d. high marketability e. All of the above are characteristics of money market securities. 2. Investors in the money markets are generally willing to take which of the following risks? a. default risk b. interest rate risk c. liquidity risk d. all of the above e. none of the above 3. Small investors are likely to invest in the money market through ____. a.
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How are banks like a manufacturing business Manufacturer financials instruments CDs saving/checking accounts & loans Banks buy money (take deposits) and then resell it at a higher price (making loans/selling securities) so in effect banks manufacture money and their raw material money‚ like selling a used car‚ buy it at a low price clean it up and sell it higher. Liabilities of banks is their source of funds‚ and their assets are the way they use the funds. P 214 Repurchase agreements SOS
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