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Money, Banking & Interest Rates - Introduction

This chapter begins by defining the global market system. The section explores the global financial system as marketplace for the demand and supply of capital. In order to understand the importance of the credit channel, we study the global financial system and the occurrence of market failures. Section 2 will focus on the demand for money by looking at the opportunity cost of holding money, the reasons for holding money. The supply of money is explored in the following section which considers types of money, the creation of money. Taking both demand and supply elements of money, the final section will explore the market equilibrium between the two including the changes in the equilibrium.

Learning outcomes:

To be able to:

  1. Learn the intricacies of the global financial system from two perspectives: as marketplace for the demand and supply of capital and the occurrence of market failure
  2. Understand the importance of the credit channel
  3. Understand the particulars of money demand and supply
  4. Bring the concepts of money supply and money demand together in order to understand the market equilibrium.
  5. Learn the changes in equilibrium through the money supply.

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