Chapter 2
An Overview of the Financial System
Chapter 2 is an introductory chapter that contains the background information on the structure
and operation of financial markets that is needed in later chapters of the book. This chapter
allows the instructor to branch out to various choices of later chapters, thus allowing different
degrees of coverage of financial markets and institutions.
The chapter introduces Global boxes, which are sprinkled throughout the text, to get students to
recognize the growing importance of the global economy. The Global box in this chapter gets
students to think about how the financial system in the United States is both similar to and
different from financial systems in other countries.
MyLab Chapter 2
Nonbank Finance
This MyLab chapter supplements Chapter 2 by going into greater detail about the structure and
regulation of nonbank financial institutions. To again stress the economic way of thinking, the
chapter has a section that applies the concepts of moral hazard and adverse selection to explain
many principles of insurance management. These concepts are also utilized in a section on
government financial intermediation to look at the potential crisis that is brewing because of
government loan guarantees. In addition, this chapter differs from more conventional chapters in