SOLUTION MANUA aaa a
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Money, Banking, Financial Markets & Institutions
aa aa aa aa aa
2nd Edition for Brandl Michael, All Chapters 1 - 24
aa aa aa aa aa aa aa aa aa
,TABLEaaOFaaCONTENTS
Part I: MONEY AND ITS PRICES.
1. IntroductionaaandaaOverview.
2. Money,aaMoneyaaSupplyaaandaaInterest.
3. Bonds,aaLoanableaaFundsaa&aaInterestaaRates.aaaa
4.aaInterestaaRatesaainaaMoreaaDetail.
PartaII:aaMONEYaaANDaaOVERALLaaECONOM
Y.
5. FinancialaaMarketsaathroughaaTime.
6. AggregateaaSupplyaa&aaAggregateaaDemand.aaaa
7.aaBanksaaandaaMoney.
Part III: CENTRAL BANKS.
8. CentralaaBanks.
9. MonetaryaaPolicyaaTools.
10. TheaaMoneyaaSupplyaaProcess.aaaa
11.aaMonetaryaaPolicyaa&aaDebates.a a
Part IV: THE BANKING SYSTEM.
12. BankaaManagement.
13. BankaaRiskaaManagementaa&aaPerformance.aaaa1
4.aaBankingaaRegulation.
Part V: FINANCIAL MARKETS.
15.aaMoneyaaMarkets.aaaa1
6.aaBondaaMarkets.
17.aaStockaaMarketaa&aaEfficiency.aaaa18
.aaMortgageaaMarket.
Part VI: GLOBALFINANCIAL
MARKETS.aaaa19.aaFX.
20. GlobalaaFinancialaaArchitecture.a a Parta
VII: FINANCIAL INSTITUTIONS.
21. ThriftsaaandaaFinanceaaCompanies.aaaa
22.aaInsuranceaaandaaPensions.
23. MutualaaFunds.
24. InvestmentaaBanksaaandaaPrivateaaEquity.
, CHAPTERaa2:aaMoney,aaMoneyaaSupply,aaandaaInterest
2-1 SectionaaReview
1. Whataaisaatheaadifferenceaabetweenaamoneyaaandaacurrency?aaWhenaaareaatheyaath
eaasame?aaWhyaamightaatheya a bedifferent?
ANS:aaMoneyaaisaaanythingaagenerallyaaacceptedaainaaexchangeaaforaagoodsaa&aaservi
ces.aaCurrencyaaisaaissuedaabya a aaabankaaoraatheaagovernment,aabutaacurrencyaaisaanotaa
necessarilyaamoney.aaTheyaaareaatheaasameaawhenaatheyaaarea a acceptedaainaaexchang
eaaforaagoodsaaandaaservices.aaCurrenciesaacanaastopaabeingaamoneyaaifaapeopleaadon’t
a a acceptthemaainaaexchangeaaforaagoodsaaandaaservices.aaIfaaaaagroupaaofaapeopleaast
opaausingaacurrencyaatoaageta a goodsaaandaaservicesaabutaainsteadaauseaabananas,aathe
naatheaabananasaaareaatheaamoney.
2. Howaamanyaapricesaamustaaaaabarteraaeconomyaahaveaaifaatheaaeconomyaahasaafo
uraagoods?aaWhataaifaaitaahasa a 400goods?aaExplainaawhyaahavingaaaaamoneyaainaath
eaasecondaacaseaaisaabeneficial.
ANS:aa4aagoodsaa=aa6aaprices;aa400aagoodsaa=aa79,800aaprices.aaMoneyaaallowsaausaat
oaaspecializeaaandaareduceaaoura a searchcost.a a Moneyaaallowsaausaatoaareduceaatheaan
umberaaofaastatedaapricesaaweaaneed.
3. Youaareadaaaaanewsaastoryaaaboutaaaaacountryaathataaisaasufferingaafromaarapid,aaong
oingaaincreasesaainaatheaacosta a ofliving.aaWhichaacharacteristicaaofaamoneyaaisaabeingaa
directlyaanegativelyaaimpactedaainaathataaeconomy?
a. Unitaaofaaaccount
b. Mediumaaofaaexchange
c. Storeaaofaavalue
d. Doubleaacoinciden
ceaaofa a wantsANS:aaC
2-2 SectionaaReview
1. Bobbyaaisaaconfused.aaHeaastates:aa―Sinceaaprisonersaaareaanotaaallowedaatoaasmokeaaina
aprisonsaaanyaalonger,a a Radford’saaaaexamplesaaaaofa a cigarettesa a ina a POWa a campsa a
noa a longera a applies.‖a a Howa a woulda a youa a explaina a toa a BobbyaahowaaaaRadford’s
a a storyaaaademonstratesaaaatheaaaaconceptsaaaa ofaaa a theaaaacriteriaaaaaofaaaamoney,aaaaasaaaaw
ella a asaaaathea a importanceaaofchangesaainaatheaamoneyaasupply?
, ANS:aaAnyaaassetaathataaisaaableaatoaabeaastandardized,aadivisible,aadurableaaandaainaade
mandaacouldaabeaacurrency,aaasa a longa a asa a ita a isa a aa a mediuma a ofa a exchange,a a isa a aa
a unita a ofa a accounta a anda a hasa a storea a ofa a value.a a Cigarettesa a werea a money.
L
Money, Banking, Financial Markets & Institutions
aa aa aa aa aa
2nd Edition for Brandl Michael, All Chapters 1 - 24
aa aa aa aa aa aa aa aa aa
,TABLEaaOFaaCONTENTS
Part I: MONEY AND ITS PRICES.
1. IntroductionaaandaaOverview.
2. Money,aaMoneyaaSupplyaaandaaInterest.
3. Bonds,aaLoanableaaFundsaa&aaInterestaaRates.aaaa
4.aaInterestaaRatesaainaaMoreaaDetail.
PartaII:aaMONEYaaANDaaOVERALLaaECONOM
Y.
5. FinancialaaMarketsaathroughaaTime.
6. AggregateaaSupplyaa&aaAggregateaaDemand.aaaa
7.aaBanksaaandaaMoney.
Part III: CENTRAL BANKS.
8. CentralaaBanks.
9. MonetaryaaPolicyaaTools.
10. TheaaMoneyaaSupplyaaProcess.aaaa
11.aaMonetaryaaPolicyaa&aaDebates.a a
Part IV: THE BANKING SYSTEM.
12. BankaaManagement.
13. BankaaRiskaaManagementaa&aaPerformance.aaaa1
4.aaBankingaaRegulation.
Part V: FINANCIAL MARKETS.
15.aaMoneyaaMarkets.aaaa1
6.aaBondaaMarkets.
17.aaStockaaMarketaa&aaEfficiency.aaaa18
.aaMortgageaaMarket.
Part VI: GLOBALFINANCIAL
MARKETS.aaaa19.aaFX.
20. GlobalaaFinancialaaArchitecture.a a Parta
VII: FINANCIAL INSTITUTIONS.
21. ThriftsaaandaaFinanceaaCompanies.aaaa
22.aaInsuranceaaandaaPensions.
23. MutualaaFunds.
24. InvestmentaaBanksaaandaaPrivateaaEquity.
, CHAPTERaa2:aaMoney,aaMoneyaaSupply,aaandaaInterest
2-1 SectionaaReview
1. Whataaisaatheaadifferenceaabetweenaamoneyaaandaacurrency?aaWhenaaareaatheyaath
eaasame?aaWhyaamightaatheya a bedifferent?
ANS:aaMoneyaaisaaanythingaagenerallyaaacceptedaainaaexchangeaaforaagoodsaa&aaservi
ces.aaCurrencyaaisaaissuedaabya a aaabankaaoraatheaagovernment,aabutaacurrencyaaisaanotaa
necessarilyaamoney.aaTheyaaareaatheaasameaawhenaatheyaaarea a acceptedaainaaexchang
eaaforaagoodsaaandaaservices.aaCurrenciesaacanaastopaabeingaamoneyaaifaapeopleaadon’t
a a acceptthemaainaaexchangeaaforaagoodsaaandaaservices.aaIfaaaaagroupaaofaapeopleaast
opaausingaacurrencyaatoaageta a goodsaaandaaservicesaabutaainsteadaauseaabananas,aathe
naatheaabananasaaareaatheaamoney.
2. Howaamanyaapricesaamustaaaaabarteraaeconomyaahaveaaifaatheaaeconomyaahasaafo
uraagoods?aaWhataaifaaitaahasa a 400goods?aaExplainaawhyaahavingaaaaamoneyaainaath
eaasecondaacaseaaisaabeneficial.
ANS:aa4aagoodsaa=aa6aaprices;aa400aagoodsaa=aa79,800aaprices.aaMoneyaaallowsaausaat
oaaspecializeaaandaareduceaaoura a searchcost.a a Moneyaaallowsaausaatoaareduceaatheaan
umberaaofaastatedaapricesaaweaaneed.
3. Youaareadaaaaanewsaastoryaaaboutaaaaacountryaathataaisaasufferingaafromaarapid,aaong
oingaaincreasesaainaatheaacosta a ofliving.aaWhichaacharacteristicaaofaamoneyaaisaabeingaa
directlyaanegativelyaaimpactedaainaathataaeconomy?
a. Unitaaofaaaccount
b. Mediumaaofaaexchange
c. Storeaaofaavalue
d. Doubleaacoinciden
ceaaofa a wantsANS:aaC
2-2 SectionaaReview
1. Bobbyaaisaaconfused.aaHeaastates:aa―Sinceaaprisonersaaareaanotaaallowedaatoaasmokeaaina
aprisonsaaanyaalonger,a a Radford’saaaaexamplesaaaaofa a cigarettesa a ina a POWa a campsa a
noa a longera a applies.‖a a Howa a woulda a youa a explaina a toa a BobbyaahowaaaaRadford’s
a a storyaaaademonstratesaaaatheaaaaconceptsaaaa ofaaa a theaaaacriteriaaaaaofaaaamoney,aaaaasaaaaw
ella a asaaaathea a importanceaaofchangesaainaatheaamoneyaasupply?
, ANS:aaAnyaaassetaathataaisaaableaatoaabeaastandardized,aadivisible,aadurableaaandaainaade
mandaacouldaabeaacurrency,aaasa a longa a asa a ita a isa a aa a mediuma a ofa a exchange,a a isa a aa
a unita a ofa a accounta a anda a hasa a storea a ofa a value.a a Cigarettesa a werea a money.
