ECON 311 1nd Edition Lecture 1 Outline of Last Lecture None Outline of Current Lecture I Economics of Financial Markets II Monetary Theory and Policy Current Lecture I Economics of Financial Markets Financial System channels funds from entities with a surplus of funds to people with a deficit of funds Parts of the Financial System 1 Financial Markets 2 Financial Intermediaries Financial Markets Direct Finance Stock Markets ownership of company Bond Markets loan from company Foreign Exchange Markets countries currency is exchanged Financial Intermediaries Indirect Finance II Banks Etc Monetary Theory and Policy Pre Crisis World If Federal Reserve Fed wants to stimulate the economy 1 Open market purchase buying bonds 2 Federal Funds rate goes down 3 Interest rates go down These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute 4 Investment spending increases 5 GDP goes up Post Crisis World Federal Reserve tries to take money out of the financial system using Reverse Repo Federal Reserve Assets Security Dealers Liabilities Assets Reverse Repo Reverse Repo Reserves Deposits Liabilities Security Dealers Bank Assets Liabilities Reverse Repo Deposits
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