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Cards In This Set
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Five parts of Financial system
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Money, Financial instruments, financial markets, Financial institutions, Central banks
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Money
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Used to pay for our purchases and store our wealth
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Financial instruments
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Transfer resources from savers to investors and risk to those who are best equipped to bear it. Eg: Stocks, mortgages, and insurance policies
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Financial markets
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Allow us to buy and sell financial instruments quickly and cheaply
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Financial institutions
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Provide services - Access to the financial markets & collect information about borrowers - credit checks. EG: banks, insurance companies
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5 principles of money and banking
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Time, risk, information, markets, stability
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Time
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Affects the value of financial transactions
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Dealing with Risk
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Requires that you consider the full range of possibilities in order to eliminate some risks, reduce others, pay someone to assume risk
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Information
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Most of us collect information before making descisions
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Markets
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Place, physical or virtual where buyers and sellers meet, where firms go to issue stocks and bonds, and where individuals go to buy assets.
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Stability
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Desirable quality not just in our personal lives but in the financial system as a whole
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Central banks
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Stabilize the economy
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Core principle 1
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Time has value
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Core principle 2
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Risk requires compensation
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Core principle 3
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Information is the basis for decisions
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