File Name: lecture notes on money and banking .zip
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Unit of account:Prices are quoted in dollars and cents. Store of value:Money allows us to transfer purchasing power from present to future. It is the most liquid spendable of all assets, a convenient way to store wealth. Supply of Money Narrow definition of money:M1 includes currency and checkable deposits see Table Is "token" money, which means its intrinsic value is less than actual value. Checkable deposits are included in M1, since they can be spent almost as readily as currency and can easily be changed into currency.
Commercial banks are a main source of checkable deposits for households and businesses. Qualification: Currency and checkable deposits held by the federal government, Federal Reserve, or other financial institutions are not included in M1.
Money market mutual fund balances, which can be redeemed by phone calls, checks, or through the Internet.
M1 will be used in this text, but M2 is watched closely by the Federal Reserve in determining monetary policy. M2 and M3 are important because they can easily be changed into M1 types of money and influence people's spending of income. The ease of shifting between M1, M2, and M3 complicates the task of controlling spendable money supply. The definition becomes important when authorities attempt to measure control and the money supply.
What "backs" the money supply? The government's ability to keep its value stable provides the backing. Money is debt; paper money is a debt of Federal Reserve Banks and checkable deposits are liabilities of banks and thrifts because depositors own them. Value of money arises not from its intrinsic value, but its value in exchange for goods and services. It is acceptable as a medium of exchange.
Currency is legal tender or fiat money. It must be accepted by law. Note that checks are not legal tender but, in fact, are generally acceptable in exchange for goods, services, and resources. The relative scarcity of money compared to goods and services will allow money to retain its purchasing power.
Money's purchasing power determines its value. Higher prices mean less purchasing power. Key Question 6 See Figure Excessive inflation may make money worthless and unacceptable. An extreme example of this was German hyperinflation after World War I, which made the mark worth less than 1 billionth of its former value within a four-year period. Worthless money leads to use of other currencies that are more stable. Worthless money may lead to barter exchange system.
Maintaining the value of money The government tries to keep supply stable with appropriate fiscal policy. Monetary policy tries to keep money relatively scarce to maintain its purchasing power, while expanding enough to allow the economy to grow.
Asset demand, Da, is money kept as a store of value for later use. It combines demand with supply of money. If the quantity demanded exceeds the quantity supplied, people sell assets like bonds to get money. This causes bond supply to rise, bond prices to fall, and a higher market rate of interest.
If the quantity supplied exceeds the quantity demanded, people reduce money holdings by buying other assets like bonds. Bond prices rise, and lower market rates of interest result see example in text. Monetary authorities can shift supply to affect interest rates, which in turn affect investment and consumption and aggregate demand and, ultimately, output, employment, and prices. Key Question 7 Try Quick Quiz Figure gives framework of Fed and its relationship to the public.
Its power means the system operates like a central bank. Assistance and Advice: Federal Open Market Committee includes the seven governors plus five regional Federal Reserve Bank presidents whose terms alternate. They set policy on buying and selling of government bonds, the most important type of monetary policy, and meet several times each year. Three advisory councils exist: Federal Advisory Council includes twelve prominent commercial bankers, one from each Fed district, who act as advisors to the Board, Thrift Institutions Advisory Council advises on thrift institution matters, the Consumer Advisory Council advises on more general issues.
See Figure The system has twelve districts, each with its own district bank and two or three branch banks. They help implement Fed policy and are advisory. They act as bankers' banks by accepting reserve deposits and making loans to banks and other financial institutions. About 8, commercial banks existed in Thrift institutions consist of savings and loan associations and mutual savings banks.
They are regulated by the Treasury Dept. Office of Thrift Supervision, but they may use services of the Fed and keep reserves on deposit at the Fed. See Figure Global Perspective gives the world's ten largest banks. The Fed sets reserve requirements and holds the reserves of banks and thrifts not held as vault cash.
The Fed may lend money to banks and thrifts, charging them an interest rate called the discount rate. The Fed provides a check collection service for banks checks are also cleared locally or by private clearing firms. Federal Reserve System acts as the fiscal agent for the Federal government. The Federal Reserve System supervises member banks.
Monetary policy and control of the money supply is the "major function" of the Fed. Federal Reserve independence is important but is also controversial from time to time. Advocates of independence fear that more political ties would cause the Fed to follow expansionary policies and create too much inflation, leading to an unstable currency such as that in other countries see Last Word for this chapter. Recent Developments in Money and Banking Relative decline of banks and thrifts:Several other types of firms offer financial services.
Consolidation among banks and thrifts:Because of failures and mergers, there are fewer banks and thrifts today. Since , there has been a decline of banks.
Convergence of services provided has made financial institutions more similar:See text on new laws of and that made many changes possible. Globalization of financial markets:Significant integration of world financial markets is occurring and recent advances in computer and communications technology suggest the trend is likely to accelerate. Electronic transactions: Internet buying and selling, electronic cash and "smart cards" are examples. In the future, nearly all payments could be made with a personal computer or "smart card.
It's like someone buying a travelers check and never cashing it. Black markets and illegal activity overseas also are usually conducted in dollars because they are such a stable form of currency. Overall, the "global greenback" is a positive economic force.
It is a reliable medium of exchange, measure, and store of value that facilitates transactions everywhere and there is little danger that all the dollars will return to U. Subject X Printer-friendly version. Need Help? Need Notes? About Course-Notes.
Lecture notes in Money, Banking and Finance. This book is intended for the Money and Banking course and is the first Money and Banking text to emerge from the financial crisis of with ample coverage. Author s : Dr Robert E. This document is highly rated. Table of Contents. This is a great book for any student that is exposed to questions of money and banking for the first umvm.
This money is in the form of cheques, drafts, etc. Let us see Money and Banking Introduction. It signifies that for every unit of money kept as reserves, banks can create five units of money. In violation of the US Constitution, complete control of American money and banking was handed over to a private European banking cartel. Business Studies 4 of children, house building and other social functions. This book presents an introduction to private sector banking as opposed to central banking. The longer the period of deposits, the higher the rate of interest is the basic principle to provide interest.
[toc] Lecture Notes - Year 2 Money, Banking and Finance Delivered by Andros Gregoriou (Professor of Finance, University of East Anglia) Efficient Markets.
It begins by addressing the concept of country risk, which is the primary risk associated with international banking activities. The economic development and material progress of a nation depend upon the sound banking and credit system. In this course we will use basic macroeconomics techniques to study financial markets and to explore the role of money in the economy.
Houses and notes on money banking and financial markets pdf download. Twemoji early notes on money banking and financial pdf download. Loan portfolios are legal notes money banking and financial pdf download full access.
This course, however, is a departure from my traditional style. First, it is a summer course. If you have peaked at the day to day planner, you will note that we do not have free time. This course will cover the same material as a regular course in only a fraction of the time.
Economics Money and Banking Lecture Notes. Gedela Praveen. i. PV(d) = FP 1 /(1 + d) + FP 2 /(1 + d) 2 + FP 3 /(1 + d) 3 + + FP n /(1 + d) n ii. For d >
Abel, Andrew B. Bernanke, , Macroeconomics, 4th ed. Aliber, Robert Z. Baumol, William A. Blinder, , Macroeconomics: Principles and Policy, 7th ed. Hester, Donald, , lecture notes for Economics , University of Wisconsin- Madison, fall semester. Compiled by Meredith Crowley.
Money is a fundamental invention like the wheel. Mobile money services provided by FinTechs and Telcos are increasingly filling the gaps left by traditional banks. Often great temples served as treasuries holds vast sums of wealth donated by its followers. Apart from accepting deposits, Goldsmiths began to lend a part of money deposited with them. Transcript and Presenter's Notes. Thus, temples provided a center around which civilization grew through its interactions.
Publisher: Saylor Foundation. Although the book covers majority of concepts in money and banking, but unfortunately it seems that all data is outdated and sometime the fundamental legislative laws like Dodd-Frank act not even mentioned. Also, more discussion of bank regulating Comprehensiveness rating: 3 see less. Also, more discussion of bank regulating system is recommended - it is very brief in chapter
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