Hubbard demonstrates how we use economic tools to understand financial markets and institutions. In doing so, he helps students learn to interpret current events, predict future developments, and make better economic decisions. Introduction: Introducing Money and the Financial System; Money and the Payments System; Overview and the Financial System. Interest Rates: Interest Rates and Rates of Return; The Theory of Portfolio Allocation; Determining Market Interest Rates; Risk Structure and Term Structure of Interest Rates. Financial Markets: The Foreign Exchange Market and Exchange Rates; Derivative Securities and Derivative Markets; Information and Financial Market Efficiency; Reducing Transactions Costs and Information Costs. Financial Institutions: What Financial Institutions Do; The Business of Banking; The Banking Industry; Banking Regulation: Crisis and Response; Banking in the International Economy. The Money Supply Process and Monetary Policy: The Money Supply Process; Changes in the Monetary Base; Organization of Central Banks; Monetary Policy Tools; The Conduct of Monetary Policy; The International Financial System and Monetary Policy. The Financial System and the Macroeconomy: The Demand for Money; Linking the Financial System and the Economy: The IS-LM-FE Model; Aggregate Demand and Aggregate Supply; Money and Output in the Short Run; Information Problems and Channels for Monetary Policy; Inflation: Causes and Consequences. For all readers interested in money and banking.