171a notes.doc

171a notes.doc - Financial Institutions and Markets: An...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Financial Institutions and Markets: An Overview Important Principle: A market, institution or security must serve some useful economic purpose and do so efficiently, otherwise it would not exist. The 5 Parts of the Financial System 1. Money: a. Medium of exchange b. Store of value c. Unit of account 2. Financial Instruments: stocks, insurance, mortgages… a. Transfer resources from savers to investors b. Transfer risk 3. Financial Markets: Markets in which we transact financial instruments a. Quick b. Low cost 4. Financial Institutions (FI)*: banks, securities firms, insurance companies … a. Provide access to financial markets b. Collect info about borrowers c. Etc. 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
a. Responsible for monetary policy b. Regulatory responsibility c. Involved with foreign exchange (in coordination with the US Treasury). *FIs are grouped into two: o Depository Institutions – those that accept deposits such as commercial banks and thrifts (such as savings banks, credit unions) o Nondepository Institutions: insurance companies; securities firms; mutual funds; pension funds; investment banks; finance companies; cash checking stores. (Loan sharks are nondepository FIs; they may be injurious to your well-being) Physical characteristic of these parts is constantly evolving. For example, money used to be gold and silver; now it is paper and becoming electronic. Financial markets used to have physical locations; it is becoming a communication system. The System is going through major changes now as the result of the financial turmoil that started in 2007. 2
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 6

171a notes.doc - Financial Institutions and Markets: An...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online