An Introduction to Money and the Financial System推荐.pdfVIP

Chapter 1 An Introduction to Money and the Financial System Learning Objectives Understand . . . LO1* The parts of the financial system LO2 The core principles of money and banking LO3 Special features and organization of the book This morning, a typical American college student bought coffee at the local café, paying for it with an ATM card. Then she jumped into her insured car and drove to the univer- sity, which she attends thanks to her student loan. She may have left her parents’ home, which is mortgaged, a few minutes early to avoid construction work on a new dormitory, i nanced by bonds issued by the university. Or perhaps she needed to purchase this book online, using her credit card, before her i rst money and banking class began. Beneath the surface, the i nancial transactions embedded in this story—even the seemingly simple ones—are quite complicated. If the café owner and the student use different banks, paying for the coffee will require an interbank funds transfer. The company that insures the student’s car has to invest the premiums she pays until they are needed to pay off claims. The student’s parents almost surely obtained their home mortgage through a mortgage broker, whose job was to i nd the cheapest mortgage available. And the bonds the university issued to i nance construction of the new dor- mitory were created with the aid of an investment bank. This brief example hints at the complex web of interdependent institutions and markets that is the foundation for our daily i nancial transactions. The system is so efi cient that most of us rarely take note of it. But a i nancial system is like air to an economy: If it disappeared suddenly, everything would grind to a halt. In the autumn of 2008, we came closer to such a i nancial meltdown than at any time since the 1930s. In the earlier episode, the collapse of the banking system led to the