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Chapter 2 The Financial System
Chapter Objectives
By the end of this chapter, students should be able to:
- Critique cultural stereotypes of financiers.
- Describe the financial system and the work that it performs.
- Define asymmetric information and sketch the problems that it causes.
- List the major types of financial markets and describe what distinguishes them.
- List the major types of financial instruments or securities and describe what distinguishes them.
- List the major types of intermediaries and describe what distinguishes them.
- Describe and explain the most important trade-offs facing investors.
- Describe and explain borrowers’ major concerns.
- Explain the functions of financial regulators.