Fundamentals of Money and Financial Systems

Understanding the role of money in the economy is essential for comprehending the complex intricacies of modern economics. Money and its value is an essential medium through which government policies are implemented to change the course of the economy. However, before attempting to comprehend these complex mechanisms it is necessary to understand the role of money. This book defines money and its value. It clarifies, in simple and clear terms, why money is demanded, what factors affect the demand for money, and what the different theories are that explain why people demand money. Next, it explains how money is created, which involves more than just printing money. Finally, the text addresses financial institutions, which are the brokers of the monetary system. The role financial institutions play in impacting the supply of the money and how they facilitate the flow of goods and services through different sectors are discussed. The discussion is focused on the theory of equilibrium in the market for goods, services and the money market.