Test Summ

Test Summ - - Financial markets Generate prices whenever...

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- Financial markets – Generate prices whenever securities are bought or sold. - Financial Institutions – Value financial assets whenever making loans to business or consumers - Money – Money, banking, and financial market refers not only to the greenbacks we spend, but more broadly to the monetary economy. - CD- deposits with specific maturities also referred to as time deposits. - FDIC- a federal agency that insures deposits at commercial banks savings bank and loan association. It also examines and supervises state character commercial banks that are not members of the Federal Reserve Systems. - The Fed – the central banking systems and monetary authority of the US made up of regional Federal Reserve banks and the governors which supervise and examines state chartered members’ banks, regulates bank holding companies, and is responsible for the conduct of monetary policy. CHP-2 Summary - M1 is the narrowest and most traditional definition: the sum of currency and all checkable deposits at banks and thrift institutions. - The FEDs regulate the bank lending and the money supply thru its control over bank reserves. By changing bank lending and the money supply, FED alters peoples liquidity and their spending on goods and services which determine GDP, the level of unemployment, the rate of inflation. - The relationship between money and spending depends on how rapidly people turn over their cash balances. This rate of turnover of money is called the VELOCITY of money. Since any given supply of money might be spent faster or slowly that is velocity might rise of fall. - Velocity – the rate of turnover of the money supple the average # of times per year each dollar is used to purchase goods and services( gdp divided by the money supply) - More money does not always lead to inflation because the velocity can fall and output can expand. In the long run, inflation cannot continue unless it is fueled by an expanding money supply. CHP 3 Summary - Saver lenders supply funds to borrower spenders either directly, by buying securities, or indirectly by buying the liabilities of specialized financial intermediaries. - Government, corporate and municipal bonds all indicate the same thing that the issue has borrowed funds at a specified interest rate for a stated period of time. When saver lenders buy these debt claims they become lenders. -
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This note was uploaded on 05/04/2010 for the course FIN 3300 taught by Professor Urso during the Spring '10 term at Kean.

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Test Summ - - Financial markets Generate prices whenever...

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