Samenvatting
Money and banking: Summary final exam (GRADE: 8.3)
- Instelling
- Universiteit Van Amsterdam (UvA)
summary money and banking final exam, UvA year 1
[Meer zien]Voorbeeld 4 van de 35 pagina's
Voorbeeld 4 van de 35 pagina's
In winkelwagengesponsord bericht van onze partner
Voorbeeld van de inhoud
Summary money and bankingChapter 1
Financial markets: markets in which funds are transferred from people who have an excess
of available funds to people who have a shortage.
- financial markets are:
1. crucial for economic efficiency.
2. Key factor producing high economic growth.
3. Poorly performing markets reason countries remain poor.
4. activities financial market direcrt effect on personal wealth, behavior
businesses/consumers, cyclical performance economy.
Debt markets and interest rates
Security: (financial instrument) claim on issuer’s future income/assets
Bond: debt security that makes periodic payments for period of time
Debt markets (or bond markets) important to economic activitiy. Enable
corporations/governents to borrow money to finance their activites, and because its where
interest rates are determined.
Interest rate: cost of borrowing or price paid for rental funds (ex: mortgage interest rate, car
loan rate, on different types of bonds)
High interest rate might deter you from buying house/car because cost financing is high.
Conversely, might encourage you to save because can earn more interest income by putting
aside some earnings as savings.
Interest rate affect consumer willingness to spend/save and business invest decisions.
The stock market
Common stock (or just stock): share ownership in corporation. It’s a security that is a claim
on earnings/assets of corporation. Issuing stock and selling it to public is a way to raise
funds to finance their activities.
Stock market most widely followed financial market (simply called: “the market”)
Stock prices are extremey volatile. Considerable fluctuations in stock prices affect the size of
people’s wealth and, as result, their willingsness to spend.
Price of shares affects amount of funds that can be raised by selling newly issued stock to
finance investment spending. Higher price for firm’s shares means that firm can raise larger
amount of funds, which it can use to buy production facilities/equipment.
Structure of the financial system
Financial intermediaries: institutions that borrow funds from people who have saved and in
turn make loans to people who need funds.
,Banks and other financial institutions
Banks: financial institutions that accept deposits and make loans. Term bank includes:
commercial banks, savings, loan associations, mutual savings banks. Credit unions.
Banks not only important financial institution. Such as insurance companies, finance
companies, pension funds, mutual funds, investment banks, growing at expense of banks
Financial innovation
Financial innovation: development of new financial products and services.
e-finance: ability to deliver financial services electronically through what has become known
as e-finance (creative thinking higher profits, sometimes disaster)
financial crises
financial crises: major disruptions in financial markets that are characterized by sharp
declines in asset prices and failures of many financial and nonfinancial firms.
Money (money supply): anything that is genereally accepted as payment for goods or
services or in the repayment of debts.
Money and business cycles
Aggregate output: total production of goods and services
Unemployment rate: % of available labor force unemployed.
Business cycles: upward and downward movement of aggregate output produced in the
economy.
Recessions: periods of declining aggregate output
Declines in the rate of money growth are often not followed by a recession
Monetary theory: theory that relates quantity of money and monetary policy to changes in
aggregate economic activity and inflation
Money and inflation
Aggregate price level (or price level) average price of goods and services in economy
Inflation: continual increase in price level, affects individuals, businesses, and government.
Price level and money supply generally rise together. Continuing increase in money supply
might be important factor in causing continuing increase in price level called inflation
Inflation rate: rate of change of the price level (% change per year).
Positive association exists between inflation and growth rate of money supply. Countries
with highest inflation rates are countries with highest money growth rates
Money and interest rates
Money plays important role in interest-rate fluctuations. As money growth rises, long-term
bond rate rises with it. Relationship has been less clear-cut
Conduct of monetary policy
Monetary policy: management of money and interest rates
Central bank: organization responsible for the conduct of a nation’s monetary policy
,US central bank: FED (federal reserve system).
Fiscal policy and monetary policy
Fiscal policy: decisions about government spending and taxation
Budget deficit: excess of government expenditures with respect to tax revenues for a
particular time period, typically a year
Budget surplus: arises when tax revenues exceed government expenditures.
Government must finance any budget deficit by borrowing, whereas a budget surplus leads
to a lower government debt burden.
Gross domestic product (GDP): measure of aggregate output
The foreign exchange market
Foreign exchange market: where conversion of one currency for another currency takes
place. Moving funds between countries.
Important because it is where the foreign exchange rate, or price of one country’s currency
in terms of another’s is determined.
A change in the exchange rate has a direct effect on American consumers because it affects
the cost of imports.
When value of dollar drops, americans decrease purchases foreign goods and increase their
consumption of domestic goods.
Book summary:
1. activities in financial markets directly affect individuals’ wealth, the behavior of
businesses, and the efficiency of our economy. Three financial markets deserve particular
attention: bond market (where interest rates are determined), stock market (which has
major effect on people’s wealth and firms’ investment decisions), and the foreign exchange
market (because fluctuations in foreign exchange rate have major consequences for U.S
economy).
2. banks and other financial institutions channel funds from people who might not put them
to productive use to people who can do so and thus play a crucial role In improving the
efficiency of the economy. When the financial system seizes up and produces a financial
crisis, financial firms will fail, which causes severe damage to the economy
3. money and monetary policy appear to have a major influence on inflation, business
cycles, and interest rates. Because these economic variables are so important to the health
of the economy, we need to understand how monetary policy is and should be conducted.
We also need to study government fiscal policy because it can be an influential factor in the
conduct of monetary policy
Appendix
GDP: market value of all final goods and services produced in a country during the course of
a year. Not counted as GDP:
1. purchases of goods that have been produced in the past
2. purchases of stocks or bonds
3. intermediate goods (sugar, energy)
, Aggregate income: total income of factors of production (land, labor, and capital) from
producing goods and services in the economy during course of a year.
Nominal gdp: values measured using current prices. If all priced doubled but actual
production of goods and services remained same, nominal GDP would double, even though
people would not enjoy benefits of twice as many goods and services. Result: nominal
variables can be misleading.
Real gdp: values measured in terms of fixed prices. Do not change because prices have
changed, only if quantities have changed.
GDP deflator: nominal gdp/real gdp
CH 4: the meaning of interest rates
Yield of maturity most accurate measure of interest rate.
Bond’s interest rate does not necessarily indicate how good an investment the bond is,
because what bond earns (rate of return) does not necessarily equal interest rate.
Real interest rate are adjusted for inflation and nominal interest rates are not.
Measuring interest rates
Cash flows: different debt instruments have different streams of cash payments to holder
Present value
Present value (or present discounted value): based on notion that dollar paid to you one
year from now is less valuable than a dollar paid to you today
Simple loan: lender provides borrower with amound of funds (principal) that must be repaid
to lender at maturity date, along with additional payment for interest.
Voordelen van het kopen van samenvattingen bij Stuvia op een rij:
Verzekerd van kwaliteit door reviews
Stuvia-klanten hebben meer dan 700.000 samenvattingen beoordeeld. Zo weet je zeker dat je de beste documenten koopt!
Snel en makkelijk kopen
Je betaalt supersnel en eenmalig met iDeal, creditcard of Stuvia-tegoed voor de samenvatting. Zonder lidmaatschap.
Focus op de essentie
Samenvattingen worden geschreven voor en door anderen. Daarom zijn de samenvattingen altijd betrouwbaar en actueel. Zo kom je snel tot de kern!
Veelgestelde vragen
Wat krijg ik als ik dit document koop?
Je krijgt een PDF, die direct beschikbaar is na je aankoop. Het gekochte document is altijd, overal en oneindig toegankelijk via je profiel.
Tevredenheidsgarantie: hoe werkt dat?
Onze tevredenheidsgarantie zorgt ervoor dat je altijd een studiedocument vindt dat goed bij je past. Je vult een formulier in en onze klantenservice regelt de rest.
Van wie koop ik deze samenvatting?
Stuvia is een marktplaats, je koop dit document dus niet van ons, maar van verkoper kdamsterdam. Stuvia faciliteert de betaling aan de verkoper.
Zit ik meteen vast aan een abonnement?
Nee, je koopt alleen deze samenvatting voor €6,99. Je zit daarna nergens aan vast.
Is Stuvia te vertrouwen?
4,6 sterren op Google & Trustpilot (+1000 reviews)
Afgelopen 30 dagen zijn er 75632 samenvattingen verkocht
Opgericht in 2010, al 14 jaar dé plek om samenvattingen te kopen