This document is the first chapter of a textbook on financial markets and institutions. It introduces why students should study these topics. It discusses that financial markets like bond and stock markets channel funds from savers to investors, promoting economic efficiency. It also explains that the Fed, interest rates, and liquidity mentioned in news reports can impact personal wealth and businesses. The chapter then summarizes key topics that will be examined in the course, including debt markets, interest rates, the stock market, and foreign exchange markets. It also discusses the structure and risks of financial institutions. The objectives are for students to understand how these markets function and use models to analyze issues and consequences of events like financial crises.
18. Learning Objectives
▪ You should be familiar with and able to
explain key elements of financial markets
and how they function, including
─ the basic theory of asset demand and
determination of asset prices,
─ the role of arbitrage and profit motive in
financial markets,
─ the role of information in financial markets,
─ and the causes and consequences of
financial crises.
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19. Learning Objectives
▪ You should be able to use appropriate
models to analyze the issues listed
above, and to draw appropriate
conclusions about the effects of
economic developments and policy
interventions.
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