Preface
As a university professor, I have enthusiastically taught Money and Banking to undergraduate students majoring in business, economics, and other disciplines. Most of my students have been juniors and seniors who are interested in learning how money and banking relate to their daily lives. Studying financial theory by itself usually means little to my students, and they do not enjoy reading lengthy discussions of topics that are overwhelmed by words issued from every direction. Instead, they want a presentation that is clear, concise, and applied to the real world—one that uses fewer words and shorter sentences while emphasizing active verbs and simple visuals.
To meet the needs of students, I have written Money, Banking, and Financial Institutions: A Contemporary Approach. It offers a succinct analysis of the U.S. monetary and banking system that emphasizes real-world applications to policy and everyday life. The approach of the book is intuitive, and it avoids explanations involving rigorous mathematics and the IS-LM model. The book assumes that readers have only the principles of economics as background. Students with a wide range of abilities will be attracted to this user-friendly book that uses relatively few words, omits needless phrases, and is very readable. The book is targeted for an undergraduate money and banking course taught in the economics department.
The compact nature of this book allows instructors freedom to use additional means of promoting student learning, such as classroom discussions regarding money and banking, outside speakers for classroom presentations, student subscriptions to newspapers, videos on money and banking topics, and student papers or projects. Personally, I have used these techniques to make my money and banking course relevant and interesting for a diverse group of students—as the saying goes, “different strokes for different folks.”
As you browse through this textbook, you will see images coming from © Shutterstock, Inc. They range from a Bitcoin logo to a Visa credit card to an image of Bank of America. In many ways, seeing a colorful image in a chapter can add much to the topic being discussed. My images are intended to hold the interest of students and entice them to read chapter sections.
Another feature of my book is “Career Profiles,” which highlights the careers of people who serve in money and banking. There is one profile per chapter. Examples include Janet Yellen (secretary of the U.S. Treasury; Chapter 5, Section 3 “Bond Market Model Applications”), Raphael Bostic (president and CEO of Federal Reserve Bank of Atlanta; Chapter 4, Section 2 “Time Value of Money”), Brian Moynihan (CEO of Bank of America; Chapter 1, Section 5 “Careers in Banking”), and Jamie Dimon (CEO of JPMorgan Chase; Chapter 9, Section 6 “Managing a Bank’s Operations”). Perhaps these profiles will provide students awareness and confidence regarding their pursuit of a career in money and banking.
Distinguishing Features of Money, Banking, and Financial Institutions: A Contemporary Approach
To meet students’ needs, this textbook includes distinguishing features regarding clarity of presentation, contemporary issues, global coverage of money and banking, and personal applications of money and banking.
Clarity of Presentation
My textbook provides a clear and concise presentation of money and banking principles. Much effort has been made to ensure that discussions are direct and to the point. Also, the book’s theoretical discussions are presented in terms of realistic examples chosen to appeal to students of all backgrounds and abilities. Moreover, diagrams used in the book include numbers on their axes (for example, an interest rate of 5 percent) to make them familiar and obvious to students. Finally, theoretical topics that students learned in their economic principles course (such as aggregate demand and aggregate supply) are reviewed before being used in this book.
Contemporary Issues
Another attribute of this book is the inclusion of real-world examples in all chapters. Examples include:
How the Federal Reserve responded to the COVID-19 pandemic
The future of Bitcoin, Stablecoin, and other cryptocurrencies
Should the Federal Reserve create a digital currency?
Does the penny make sense for the U.S. economy?
The failure of the Washington Public Power Supply System
Do Moody’s, Standard and Poor’s, and Fitch have a conflict of interest?
Bank mergers and their effects on national welfare
Federal Reserve stress tests for banks
Operation Twist and the yield curve
Should the Federal Reserve maintain its independence?
How an asset bubble can trigger financial crisis and recession
Bank holding companies dominate the banking landscape
Federal Reserve starts shrinking its balance sheet in 2022
How the Federal Reserve’s 2 percent inflation target occurred
Financing the Civil War: How the Greenback dollar saved the Union
The Dodd-Frank Act—Wall Street Reform and Consumer Protection Act
Are big banks too big to fail?
The Federal Deposit Insurance Corporation and bank failure
Federal Reserve Chairman Paul Volcker and the Great Inflation
How the Federal Reserve got it wrong on inflation in 2021–2023
Should the United States continue its system of fiat money?
How Amadeo Peter Giannini founded and grew the Bank of America
The effect of scarce reserves and abundant reserves on the Federal Reserve’s monetary policy
The 2007–2009 financial crisis and the Great Recession
How the Federal Reserve responded to the September 11, 2001 terrorist attack
What if the Federal Reserve loses money?
The rise and fall of Federal Reserve float
Global Coverage of Money and Banking
No money and banking textbook can ignore discussions of international economics and finance. Money, Banking, and Financial Institutions: A Contemporary Approach provides a global perspective by weaving international topics into chapters. Also, the book includes two chapters (Chapter 15 “Foreign Exchange Market and International Banking” and Chapter 16 “Exchange Rate Systems”) that deal with the foreign exchange market, international banking, and exchange-rate systems. Here are some of the international topics covered in this book:
Saving money when exchanging foreign currency
What caused the euro to return to parity in 2022?
Foreign exchange speculator George Soros and the Bank of England in 1992
Monetary policy in a global economy
International banking—letter of credit and banker’s acceptance
The regulation of foreign banks in the United States
Understanding currency pairs and foreign exchange quotations
The U.S. Export–Import Bank
Relative purchasing power parity
Hedging, speculation, and the foreign exchange market
Exchange rate determination in the short run and long run
International lending—country risk and currency risk
Forecasting exchange rates—judgmental, technical, and econometric forecasting
Exchange rate systems—fixed, floating, and managed floating exchange rates
Currency crises, currency boards, and dollarization
Russia’s war against Ukraine, economic sanctions, and the loanable funds model
U.S. companies use hedging strategies as a strong dollar reduces profits in 2022
Personal Applications of Money and Banking
My experience is that students become interested in money and banking when they see its importance for their lives. Besides using an abundance of current examples to demonstrate the relevance of money and banking principles, this book includes personal banking applications to promote student awareness, such as:
Should you withdraw from your bank CD before its maturity date?
Why might the interest rate on your savings account lag other rates?
Should the Loan Shark Prevention Act be passed by Congress and approved by the president?
Using credit cards and debit cards wisely
Careers in banking: how to research the banking job market
Managing your money by investing
Special types of checks—cashier’s checks, certified checks, money orders, and traveler’s checks
Buying a home—a fixed rate mortgage versus a variable rate mortgage
Treasury inflation-protected securities—TIPS and I-bonds
Should you invest in municipal bonds?
Calculating finance charges on your credit card balance
What are “holds” on checking deposits?
Do you want a crypto rewards credit card or debit card?
How does the check processing and clearance system work?
When the Federal Deposit Insurance Corporation raises insurance premiums, will your bank pass the rate hike on to you?
Additional Features
Along with the included supplements, this book provides the following features to assist Money and Banking instructors.
YouTube Videos
Since this book emphasizes technology, it is appropriate to use the free technology available to nail down concepts for students. Each chapter has several YouTube videos dealing with money and banking applications.
Learning Objectives by Section and Chapter Summary
Rather than including a lengthy list of learning objectives at the beginning of a chapter, this book divides the learning objectives by section. Each chapter is also accompanied by a comprehensive yet succinct chapter summary to encourage information retention.
Study Questions
Along with the chapter summary, each chapter includes a set of study questions to reinforce pertinent topics learned in the chapter before moving on to the next.
Supplements
Money, Banking, and Financial Institutions: A Contemporary Approach is accompanied by a robust supplements program that augments and enriches both the teaching and student learning experiences. The authors personally prepared all of the supplements to ensure accuracy and to ensure full alignment with the book’s narrative. Faculty should contact their FlatWorld sales representative or FlatWorld support at support@flatworld.com for more information or to obtain access to the supplements upon adoption.
Sample Syllabi
Sample syllabi based on either 15-week or 10-week terms provide useful templates that help new adopters transition from their current course textbook to Money, Banking, and Financial Institutions: A Contemporary Approach. Faculty can download the syllabi from the FlatWorld website or they can be obtained by contacting your local FlatWorld representative or FlatWorld support (support@flatworld.com).
Instructor’s Manual
The contents of each of the sixteen chapters of the Instructor’s Manual include:
Table of contents
Chapter summary
Key terms and concepts, with definitions
Brief answers to end-of-chapter study questions
Lecture tips
Resources and activities
PowerPoint Slides
PowerPoint Slides organized by chapter and section include a concise and thorough outline, a list of Learning Objectives and Key Takeaways, and figures and tables contained in the text. These slides work well for both face-to-face and online learning environments, enliven lectures, and stimulate class discussions. Adopters can use the slides as composed to support lectures or customize and build upon them to suit their particular teaching goals.
Test Item File
The Test Item File (TIF) includes more than seventy questions per chapter in multiple-choice, true/false, and short essay-question formats. All answers are provided, including possible responses to the essay questions. The items have been written specifically to reinforce the major topics covered in each chapter and to align with FlatWorld Homework and in-text quiz items. The Test Item File questions are also available in pre-formatted form for easy export into popular learning management systems such as Canvas or Blackboard.
Test Generator—Powered by Cognero
FlatWorld is pleased to provide a computer-generated test program powered by the leading assessment provider Cognero to assist instructors with selecting, randomizing, formatting, loading online, or printing exams. Please contact your local FlatWorld representative or FlatWorld support (support@flatworld.com) for more information or to request the program.
FlatWorld Homework
FlatWorld Homework is provided in an easy-to-use interface. Multiple choice, drop-down, and other question types are available for use and are all auto-gradable. Students who utilize the homework questions should see their performance improve on examinations that are given using the Test Item File questions that accompany this book.
Online Quizzes and Flashcards
Autograded Quiz questions and Flashcards for student self-evaluation are organized by chapter and section and embedded in the online version of the book. Students can use the Quizzes and Flashcards to test their comprehension by section as they read and learn, once they have completed a chapter, or for test review.