The U.S. financial system is composed of: (1) policymakers, (2) a monetary system, (3) financial institutions, and (4) financial markets.
Indicate which of these components is associated with each of the following roles—and explain who it facilitates the activity:
a. accumulate and lend/invest savings
b. create and transfer money
c. pass laws and set fiscal and monetary policies
d. market and facilitate the transfer of financial assets 2.

Your boss has told you that tomorrow the Federal Drug Administration (FDA) will announce its approval of your firm’s marketing of a new breakthrough drug. As a result of this information, you are considering purchasing shares of stock in your firm this afternoon. Discuss whether or not you would purchase the stock and discuss the implications of the six financial principles for this scenario. 3.

A number of terms are introduced in these chapters which have implications for how we, as individuals, manage our debt and payments. Explain the differences between:
a. debit cards and credit cards—which would you prefer to use? Why?
b. money market mutual funds and CDs (certificates of deposit)—which is preferable for investing funds you may need next month? Why?
c. federal funds and Treasury bills—and explain how each is used to fund the needs of their users

4.

Go to http://www.stlouisfed.org and identify sources of funds for commercial banks. Hint: Type “commercial banks” in the Search box.

5.

The Federal Reserve Board has decided to ease monetary conditions to counter early signs of an economic downturn. Because price inflation has been a burden in recent years, the Board is eager to avoid any action that the public might interpret as a return to inflationary conditions.
How might the Board use its various powers to accomplish the objective of monetary ease without drawing unfavorable publicity to its actions?