ECON-AD 300 Lecture Notes - Lecture 1: Commercial Bank, Federal Funds Rate, United States Treasury Security
31 Jan 2017
School
Department
Course
Professor
Document Summary
A financial system can be compared to an irrigation system. The financial crisis of 2008 2009 showed what happens when credit does not flow. Just as a lack of water keeps crops from growing, lack of credit keeps the economy from growing. Just like a severe drought can cause many crops to die, an extreme scarcity of credit can kill of parts of the economy, resulting in a severe recession. During the last recession, more than 8 million jobs were lost, gm declared bankruptcy, and some wall street investment houses disappeared. Few people doubt the importance of the financial system, but the financial crisis also exposed the complexity of the system. The financial system comprises of: financial markets, financial institutions and the regulators including the fed. repay funds funds claims against borrowers) Financial markets (suppliers and demanders of funds interact and set prices of financial assets repay funds funds like bonds, stocks &
