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The Function of Financial Markets

In: English and Literature

Submitted By mengqianwang
Words 1610
Pages 7

Eco 304L

Fall 2014

Topic 6 – Financial Markets The Financial System -­‐ How Businesses Finance Themselves Saving and Investment (National Income Accounting Redux) Ricardian Equivalence and Temporary vs. Permanent Taxt Cuts The Market For Loanable Funds – Modeling Financial Markets


Topic 6 – Financial Markets The Financial System -­‐ How Businesses Finance Themselves

The Financial System The Pinancial system is made up of !inancial institutions that bring borrowers and lenders together ¤ Financial markets: institutions through which borrowers and lenders come together directly ¤

bond markets n stock markets n


Financial intermediaries: organizations that interact with borrowers and lenders separately and bring them together indirectly banks n mutual fund n


Financing a company ¨ How can a company raise funds?

Self-­‐!inance ¤ Borrow indirectly from a Pinancial

intermediary, such as a bank ¤ n smaller, newer companies

take out a loan larger, older companies


Raise funds directly in Pinancial markets

issue and sell bonds n issue and sell stock n...

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