This is “The Financial System”, chapter 2 from the book Finance, Banking, and Money (v. 2.0). For details on it (including licensing), click here.

For more information on the source of this book, or why it is available for free, please see the project's home page. You can browse or download additional books there. To download a .zip file containing this book to use offline, simply click here.

Has this book helped you? Consider passing it on:
Creative Commons supports free culture from music to education. Their licenses helped make this book available to you.
DonorsChoose.org helps people like you help teachers fund their classroom projects, from art supplies to books to calculators.

Chapter 2 The Financial System

Chapter Objectives

By the end of this chapter, students should be able to:

  1. Critique cultural stereotypes of financiers.
  2. Describe the financial system and the work that it performs.
  3. Define asymmetric information and sketch the problems that it causes.
  4. List the major types of financial markets and describe what distinguishes them.
  5. List the major types of financial instruments or securities and describe what distinguishes them.
  6. List the major types of intermediaries and describe what distinguishes them.
  7. Describe and explain the most important trade-offs facing investors.
  8. Describe and explain borrowers’ major concerns.
  9. Explain the functions of financial regulators.