Money, Banking, Financial Markets & uInstitutions

SOLUTION u




uMANUAL
Money, Banking, Financial Markets & Institutions
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2nd Edition for Brandl Michael, All Chapters 1 - 24
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,TABLE OF CONTENTS u u




Part I: MONEY AND ITS PRICES.
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1. Introduction and Overview. u u


2. Money, Money Supply and Interest. u u u u


3. Bonds, Loanable Funds & Interest Rates. 4.
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Interest Rates in More Detail.
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Part II: MONEY AND OVERALL
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ECONOMY.
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Financial Markets through Time. u u u


6. Aggregate Supply & Aggregate Demand. u u u u u


7. Banks and Money.
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Part III: CENTRAL BANKS.
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8. Central Banks. u


9. Monetary Policy Tools. u u


10. The Money Supply Process. u u u u


11. Monetary Policy & Debates.
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Part IV: THE BANKING SYSTEM.
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12. Bank Management. u


13. Bank Risk Management & Performance.
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14. Banking Regulation.
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Part V: FINANCIAL MARKETS.
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15. Money Markets.
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16. Bond Markets.
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17. Stock Market & Efficiency. 18.
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Mortgage Market.
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Part VI: GLOBAL FINANCIAL MARKETS. 19.
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FX.
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20. Global Financial Architecture. Part u u u


VII: FINANCIAL INSTITUTIONS.
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21. Thrifts and Finance Companies. u u u u


22. Insurance and Pensions.
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23. Mutual Funds. u


24. Investment Banks and Private Equity. u u u u

, CHAPTER 2: Money, Money Supply, and Interest u u u u u u




2-1 Section Review u




1.What is the difference between money and currency? When are they the
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same? Why might they bedifferent?
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ANS: Money is anything generally accepted in exchange for goods & services.
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Currency is issued by a bank or the government, but currency is not
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necessarily money. They are the same when they are accepted in exchange
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for goods and services. Currencies can stop being money if people don’t
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uacceptthem in exchange for goods and services. If a group of people stop
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using currency to get goods and services but instead use bananas, then the
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bananas are the money.
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2.How many prices must a barter economy have if the economy has four
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goods? What if it has 400goods? Explain why having a money in the
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second case is beneficial.
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ANS: 4 goods = 6 prices; 400 goods = 79,800 prices. Money allows us to
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specialize and reduce our searchcost. Money allows us to reduce the
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number of stated prices we need.
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3. You uread ua unews ustory uabout ua
country that is suffering from rapid, ongoing u u u u u u u


increases in the cost ofliving. Which characteristic of money is being directly
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negatively impacted in that economy?
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a. Unit of account u u



b. Medium of exchange u u



c. Store of value u u



d. Double
coincidence of
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u wantsANS: C u




2-2 Section Review u




1. Bobby uis uconfused. uHe ustates: u“Since uprisoners uare unot uallowed uto usmoke uin
prisons any longer, Radford’s examples of cigarettes in POW camps
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no longer applies.” How would you explain to Bobby how Radford’s
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, u story demonstrates the concepts of the criteria of money, as well as
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u the importance ofchanges in the money supply?
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ANS: Any asset that is able to be standardized, divisible, durable and in
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demand could be currency, as long as it is a medium of exchange, is
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a unit of account and has store of value. Cigarettes were money.
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