Chapter 1: Money and financial system

financial system have …. parts, …… principles

6 parts - 5 core principles.

parts of financial systems are

agencies, central bank, money, markets, institution, instrument

principles of financial systems

time have value, risk require compensation, in4 is the basis for decisions, makerts determine prices and allocate resources, stability improves welfare.

financial instruments used to

transfer resources/ capitals from savers → investors

risks → those who best equipped

financial instruments are

money, bonds, stock..

markets is the place to

buy and sell instruments

determine prices through supply and demand

financial institutions can be

banks, securities firms, insurance companies…

what does central bank do?

monitor and stabilize the economy

what does central bank aim for?

ổn định lạm phát, tăng trưởng và giảm rủi ro thông qua monentary policies

what tools does central bank use meet its goals?

i, rd, OMO, FR…

Agencies

ensure everything work well and reliable

financial markets princiles are based on

time, risks, information, market, stability

time have value

opportunities costs

time have value

risk require compensation 

higher risks - higher return

compensation are

Insurance, interest rates, and investment decisions.

In4 is the basis for decisions

better data - better decisions

poor data can lead to crisis

Market and Information 

Markets reduce information costs

Markets Determine Prices and Allocate Resources

Well-developed markets —> lower transaction and information costs.

Markets can fail —> crisis

markets need control by government

Stability Improves Welfare

stable finance —> encourages investment and job creation —> improving overall welfare.