Financial sector

This course is a part of AP®︎ Macroeconomics, a 9-course Topic series from Khan Academy.

In this unit, you'll learn about the financial sector and monetary policy. By knowing the definition of money and other financial assets, you'll be able to explore how the money market and the loanable funds market determine equilibrium nominal and real interest rates. Want to know more about central banks’ monetary policies and the effects of monetary policy actions? Explore this unit to find out!

This course contains 7 segments:

Financial assets

Financial markets are where households can invest their savings by purchasing financial assets. This lesson explores the basic features of some of the options available to households to store their wealth.

Nominal v. real interest rates

Nominal interest rates include expectations about inflation. When borrowers and lenders come to an agreement about interest rates, they are agreeing on the nominal rate of interest based on what they want to earn or pay (the real interest rate) and what they expect about inflation.

Definition, measurement, and functions of money

What is money? Money is anything that serves the three primary functions of money.

Banking and the expansion of the money supply

In this lesson, learn the role that banks play in the process of creating money.

The Money market

The money market describes how nominal interest rates adjust to determine how much money individuals and firms want to hold at any given time. In this lesson, learn about the demand for money and the liquidity preference of the interest rate.

Monetary policy

How do central banks use the money supply to affect macroeconomic variables and the economy? Find out in this lesson!

The Market for loanable funds

In this lesson, learn how the interaction of borrowers and savers determines the real interest rate.