2
The Financial System and the Level of Interest Rates
Learning Objectives
Describe the role of the financial system in the economy and the two basic ways in which money flows through the system.
Discuss direct financing and the important role that investment banks play in this process.
Describe the primary, secondary, and money markets, explaining the special importance of secondary and money markets to business organizations.
Explain what an efficient market is and why market efficiency is important to financial managers.
Explain how financial institutions serve the needs of consumers and small businesses.
Compute the nominal and the real rates of interest, differentiating between them.
One of the most important institutional players in the financial system is the Federal Reserve ...
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