(b) Commercial banks and financial markets

(c) Central banks and monetary policy

financial supervision

(5) Foreign financial relations and policies

As the title, this part has two parts: currency; Finance. Among them, the first chapter is about money; Chapters two to five talk about finance. In addition, the third chapter "Central Bank" involves monetary policy knowledge, and the fifth chapter involves exchange rate and currency convertibility.

Chapter one, money supply and demand and money equilibrium. This chapter is divided into four sections, followed by money demand, money supply, money balance and inflation. Money supply is a process in which the central bank first creates credit, and then the commercial banking system expands credit. That is, the central bank creates initial deposits, and then the commercial banking system creates derivative deposits on this basis.

Starting from the second chapter, I will talk about finance, including financial institutions, financial markets, financial policies (mainly monetary policies), financial supervision, foreign financial relations and so on.

The second chapter first talks about commercial banks and financial markets. We say that enterprises are the main body in the market economy, so in the financial industry, commercial banks are the main body of this market and bear the status of financing in the whole society. Of course, there are many non-bank financial institutions such as securities companies, insurance companies, fund companies and trust companies in the financial market, but commercial banks are still the financial institutions that are most closely related to people's daily lives and the only financial institutions that can absorb demand deposits. After talking about financial institutions, let's talk about financial instruments, mainly stocks and bonds, the two most basic tools, focusing on their pricing methods and remembering several pricing formulas. Finally, financial markets can be divided into money markets and capital markets according to their duration. Financial markets, like financial intermediaries such as commercial banks, also have the function of financing, while others have certain substitutability. That is, the logical order of this chapter is: financial institutions (commercial banks), financial instruments (stocks and bonds) and financial markets (capital markets and money markets).

The third chapter talks about the central bank and monetary policy. What needs to be distinguished here is that the central bank has different meanings from what we call banks every day. The central bank is a currency issuing bank, a national bank and a bank in charge of banks. That is, the central bank will not engage in the deposit and loan business for industrial and commercial enterprises and individuals. Its job is to issue currency, manage the commercial banking system and provide financial services for the country. The central bank is the maker and executor of monetary policy, and the second section of the third chapter tells the content of monetary policy.

The third chapter introduces financial supervision, including financial supervision theory, different types of financial supervision systems and the most important international convention on financial supervision-Basel Accord.

The fifth chapter is international finance, focusing on foreign financial relations and policies. The contents include: exchange rate, balance of payments, a country's foreign exchange policy (foreign exchange control and currency convertibility).

The above is the overall structure of this part, from money to finance, from market participants to market regulators, from domestic to international, which is a complete system. The formulas involved include several formulas of money supply and demand, pricing formulas of stocks and bonds, and exchange rate determination formulas.

Second, the content explanation

(A) money supply and demand and money balance

(1) Money demand

1, money demand and money demand

Money demand: refers to the behavior that economic subjects are able and willing to hold money. Among them, demand is effective demand and the unity of ability and desire. Money demand comes from commodity demand.

Money demand: refers to the amount of money that each department in the economy needs to hold in a specific time and space, that is, the objective demand for money in a certain period of time.

2. The traditional theory of money quantity

Transaction equation: proposed by Fisher, mv = pt, where V and T are stable, reflecting the theory that the amount of money M determines the price level P.

Cambridge equation: put forward by Pigou, п= k*y/m, where k refers to the ratio of people's money holdings to total expenditures. The formula also shows that the rise and fall of price and monetary value depends on the change of monetary quantity.

Relationship: Both of them believe that the rise and fall of commodity prices and monetary value depends on the change of money quantity, but the money demand in Cambridge Equation includes not only trading money, but also storage money.

3. Keynes's theory of money demand-liquidity preference theory.

There are three motivations that affect people's liquidity preference: trading motivation, prevention motivation and speculation motivation.

Keynes's money demand function: l=l 1(y)+l2(i), where l 1(y) refers to transactional demand and is the increasing function of national income y; L2(i) refers to speculative demand, which is a decreasing function of interest rate. There are printing errors in the textbook.

4. Friedman's modern monetary quantity theory.

Money demand function: m/p = f (yp; w； im； IB； Namely; DP/dt； μ)

There are four factors that influence people to hold real money: total wealth; Wealth composition; The expected rate of return on financial assets; Other factors

(2) Money supply

1, money supply and money supply

Money supply: the main body of money supply is the behavior of banks supplying money to economic entities to meet their money needs in modern economy.

Money supply: the amount of monetary assets held by non-banking departments, that is, the amount of money in circulation.

Division principle: generally, according to the liquidity of assets, that is, the ability or real purchasing power of various monetary assets to convert into money, different monetary levels are divided, and then different caliber money supply is generated.

China's current monetary system;

M0= cash in circulation

Narrow money supply: m 1=m0+ bank demand deposits.

Broad money supply: m2=m 1+ other deposits in the banking system (mainly time deposits, savings deposits and fiscal deposits, etc.). ).