Money and Banking Class Recommendation

2244 Words9 Pages
To anyone considering taking Money and Banking I highly recommend this class. As a student I have learned how the financial system, money, banks, and the Federal Reserve work. Each of these factors is an integral part in the world economy. To be able to understand why there are recessions, inflation, and deflation one must have an understanding of money supply, interest rates, investing, and the effects of government policy. The first important thing I learned in Money and Banking is how the financial system works. Knowing how the financial system works is the basis and foundation for understanding banks and the financial market. Financial markets make money flow more freely by connecting those with surplus funds such as the government, businesses, and households with those who are spenders. For instance, someone who has an inheritance fund might wish to have their money earn interest. The financial market makes it possible for the individual with money to invest to find a suitable investment for their money quickly. An entrepreneur, who would be classified as a spender, is looking for cash to be invested towards their idea. The financial markets make it possible for the entrepreneur to find available funds for their business idea. There are two types of financial markets: the primary and the secondary. A primary market is where a company would issue an IPO or an initial public offering. It is also where new bonds are issued. The buyers in the primary market are usually corporations or the government who has a large sum of cash to invest. The secondary market is where securities that have been previously sold can be resold. The public is more familiar with the secondary market, like the New York Stock Exchan... ... middle of paper ... ...economic meltdown will be the result. The banks that received bailout money have very large amounts of cash in reserve. Normally, banks lend their reserves to create additional wealth. The high amount of foreclosures and defaults on loans has kept the banks busy with their balance sheets and the amount of lending to businesses and the public is low. When the banks are no longer worried about their financial situation they will become aware of the large amounts of money in their reserves. This could cause another lending spree, inflation, and another economic catastrophe to occur. Having a basic understanding of how the financial system works, how a financial crisis happens, and the causes of inflation is important. Knowledge can help the average citizen protect themselves from their own financial disaster by being aware of what is going on in the economy.
Open Document