Money
Notes from 3/9-10/16
Financial Sector
Financial Assets- Stocks or bonds that provide expected future benefits
+Benefits the owner only if the issuer of the asset meets certain obligations
Financial Liabilities- Is incurred by the issuer of a financial asset to stand behind the issued asset.
+Liabilites: OWED Assets: OWN
Interest Rate- The price paid for the use of a financial asset
Stocks- Financial assets that convey ownership in a corporation
Bonds- The promise to pay a certain amount of money plus interest in the future
What Banks Do?
-A bank is a financial intermediary
+Uses liquid assets to finance the investments of borrowers
+Process known as Fractional Reserve Banking
-System where depository institutions (banks) hold liquid assets less than the amount of deposits
-Takes forms of:
*Currency of bank vaults
*Bank reserves: Deposits held at the Federal Reserve
Basic Accounting Review
-T-Account (Balance Sheet)
+Statement of assets of liabilities
+Assets = Liabilities
- Assets (Amount Owned)
+Items to which a bank holds legal claim
*Examples: Capitol Stock, Owner's Equity
-Liabilities (Amounts Owed)
+The legal claims against a bank
Functions of the Federal Reserve Bank (FED)
1. Issue paper money
2. Sets reserve requirement and holds reserves of the bank
3. Lends money to banks and charges them interest
4. A check-clearing service for banks
5. Acts as a personal bank for the government
6. Supervises member banks
7. Control the money supply
-JaelyNoTainted
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Get it?
Thank you for these notes, very understanding! However to explain more about the stocks and bonds these also are considered government securities meaning that the assets we own is our own stocks ventured out for consumers to buy, its everything that you have in possession.
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