NT_tema_1_English_revised - MODULE1.Introduction...

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1 MODULE 1. Introduction Learning goals: To know the definitions relating to the financial system To understand the basic concepts relating to Instruments (assets) To understand the basic concepts of markets. To understand the basic concepts relating to intermediaries (banks, savings banks, brokers, etc.) To understand the basic concepts relating to regulatory bodies (Bank of Spain, CNMV, DGSFP) Context: Students should imagine that they have joined an intermediary or regulatory body of their choice. They should see this as a conceptual immersion which allows them to carry out the main responsibilities assigned them at work. Overview: 1. Introduction and structure 2. Definition of: a. Instruments b. Markets c. Intermediaries d. Regulatory bodies Continuous assessment: Each student should present an executive report no more than a page long. In it they should explain the concepts of the four key elements of the financial system in their own words. Bearing in mind the intermediary or regulatory body chosen, they should offer a personalized overview of the implications with regard to the other key elements.
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2 1. Introduction and overview Why is the financial system important? In the most primitive economy barter how could a hunter and a gatherer exchange fresh meat for fruit that has still to ripen? Using financial instruments. I exchange the meat from half a cow today for ¼ of your apple crop at the end of summer. “Futures contracts on the crop?” Without them and without the mechanisms that provide the process with efficiency, the economy wouldn’t work properly. Set of elements, environments and rules that allow for the transfer of funds. What are the elements that make up the financial system? Financial Instruments + Financial Intermediaries + Markets + Regulatory Bodies Let’s consider a simple economy made up of: Families: the ultimate owners of all resources. Families use their surplus income to invest in companies, and their investment is returned by these companies with earnings. Companies: Organization of production work; using the resources provided by families to generate goods and services, which are sold to provide them with income. This is an isolated economy, with no foreign trade. We have money: form of payment / unit of account / store of value. Resources – non financial: Families provide work (inputs) (1) and obtain income (2) Companies sell their product (3) and charge for it (4) Companies Families INPUTS OUTPUTS INCOME PAYMENT FOR GOODS & SERVICES (1) (4) (2) (3)
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3 (2) occurs before (4): companies need tools in order to pay families before the sales cycle is complete for their products. If the resources are Financial: Families – contribute their surplus income as an investment in companies (1), from which they obtain their investment plus earned Income (2). Companies – use the resources provided by families to generate goods and services (3)
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NT_tema_1_English_revised - MODULE1.Introduction...

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