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Cover of Money, Banking, and Financial Institutions: A Contemporary Approach v1.0
Published: 
January 2024
Page Count: 
474
ISBN (Digital): 
979-8-88794-087-8

Money, Banking, and Financial Institutions: A Contemporary Approach

Version 1.0
By Robert Carbaugh

Included Supplements

Key Features

  • Over 100 embedded hyperlinks to streaming videos and webpages enrich hybrid and online courses, engage students, and reinforce or augment many of the presented topics
  • Clear and concise presentation minimizes discussions of theoretical tools, mathematics, and macroeconomic policy in order to focus on institutional components and how the banking system works in the real world
  • Employs concrete, real-life examples that appeal to students with limited preparation in economics
  • Highlights contemporary issues, often with applied case studies such as how the Federal Reserve responded to the COVID-19 pandemic; how the Federal Reserve got it wrong on inflation in 2022; “Shadow Banks;” the future of cryptocurrency; asset bubbles and triggers of financial crisis; and bank mergers and their welfare effects
  • Career spotlights on a diverse array of figures in the banking and financial industries, such as Ventris Gibson (Section 3.2),  Raphael Bostic (Section 4.2), Janet Yellen (Section 5.2), Thasunda Brown Duckett (Section 6.1), Jamie Dimon (Section 9.6), the Federal Reserve Board of Governors (Section 12.3), Jerome Powell (Section 12.3), and Mary Daly (Section 13.2)
  • Superior explanations of complicated topics, such as Commercial Banking (Ch. 10 “The Commercial Banking Industry”), Deposit Insurance (Ch. 11 “Deposit Insurance”), The CAMELs System (Section 11.3), and the Federal Reserve System (Ch. 12 “The Federal Reserve System”) 
  • Global perspective weaves international topics throughout the narrative in meaningful ways and with two full global chapters (Ch. 15 “Foreign Exchange Market and International Banking” and Ch. 16 “Exchange Rate Systems”)
  • Supportive Learning Features for each chapter include:
    • “Learning Objectives” at the beginning of each main section preview the material to come and prepare students to learn
    • “Key Terms” highlight vital terminology and concisely define key concepts 
    • “Key Takeaways” at the end of each main section reflect the corresponding Learning Objectives and summarize key ideas in bullet-point fashion. “Key Takeaways” enable learners to pause and consolidate the information just encountered into a “chunk.” This process enables the reader to better understand and retain the section’s content and its key concepts
    • “Career Profiles” in each chapter highlight a key banking figure, including the leader’s pertinent background and career progression 
    • “Chapter Summaries” distill key chapter information to reinforce study skills
    • “Study Questions” provide opportunities to apply information just learned to test knowledge and support information retention
  • TIFs, IMs, PPTs, Quizzes, and Sample Syllabi are written by the author to ensure accuracy and alignment with the book. Answer guidelines for “Study Questions” are included in the instructor’s manual
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Money, Banking, and Financial Institutions: A Contemporary Approach is intended for courses called Money and Banking; Banking and Financial Institutions; Introduction to Financial Institutions, or similar titles taught primarily in the economics department at the undergraduate or MBA level, usually at four-year colleges and universities.

Money, Banking, and Financial Institutions: A Contemporary Approach is a clear and concise presentation of the basics of financial markets that presumes only principles of economics as preparation. This user-friendly text avoids unnecessary jargon, peripheral topics, and overly detailed explanations, making for a readable and engaging narrative. Key concepts are introduced in a consistent format, making it easier for learners to quickly locate the descriptions and remember them in a more structured way.


This book emphasizes how money and banking connects to the real world, often providing valuable insights into personal banking experiences students encounter daily. Its intuitive and research-based approach avoids rigorous explanations, the use of mathematics, and the IS-LM model. Key contemporary topics include the economics of credit cards and debit cards; the advantages and disadvantages of fixed rate mortgages and variable rate mortgages; the role of the Federal Deposit Insurance Corporation (FDIC) in insuring checking and savings deposits; how checks are processed throughout the banking system; what happens when a bank goes bankrupt; and how interest rate changes by the Federal Reserve affect the costs of consumer and student loans. It also provides useful insights into how the Federal Reserve responded to the terrorist attack on the United States in 2001; the Great Recession of 2007–2009; the COVID-19 pandemic; and recent turmoil in financial markets.

  • About the Author
  • Acknowledgments
  • Preface

    • Chapter 1: Introduction to Money, Banking, and Financial Markets

  • 1.1 What Are Financial Markets?
  • 1.2 Depository Institutions: Commercial Banks and Thrift Institutions
  • 1.3 Financial Institution Regulators
  • 1.4 Monetary Policy: Why Is Money Important?
  • 1.5 Careers in Banking
  • 1.6 Chapter Summary and Study Questions

    • Chapter 2: The Financial System

  • 2.1 Financial Market Functions
  • 2.2 Financial Market Components
  • 2.3 Instruments of the Money Market
  • 2.4 Instruments of the Capital Market
  • 2.5 Financial Intermediary Services
  • 2.6 Financial Intermediary Categories
  • 2.7 Investing in the Stock Market
  • 2.8 Chapter Summary and Study Questions

    • Chapter 3: Understanding Money

  • 3.1 The Meaning of Money
  • 3.2 The U.S. Money Supply
  • 3.3 Measuring the Money Supply
  • 3.4 Fiat Money: What Backs the Money Supply?
  • 3.5 Bitcoin and Other Cryptocurrencies
  • 3.6 Chapter Summary and Study Questions

    • Chapter 4: Understanding Interest Rates

  • 4.1 What Is Interest?
  • 4.2 Time Value of Money
  • 4.3 Debt Instruments and Interest Rates
  • 4.4 Market Interest Rates, Bond Prices, and Bond Yields
  • 4.5 Interest Rate Applications
  • 4.6 Fighting Inflation Risk with TIPS and I-Bonds
  • 4.7 Chapter Summary and Study Questions

    • Chapter 5: Interest Rate Determination

  • 5.1 Constructing an Investment Portfolio
  • 5.2 The Bond Market Model and Interest-Rate Determination
  • 5.3 Bond Market Model Applications
  • 5.4 The Loanable Funds Model and Interest-Rate Determination
  • 5.5 Loanable Funds Market Applications
  • 5.6 Chapter Summary and Study Questions

    • Chapter 6: Risk Structure and Term Structure of Interest Rates

  • 6.1 Risk Structure of Interest Rates
  • 6.2 Term Structure of Interest Rates
  • 6.3 Chapter Summary and Study Questions
  • 6.4 Appendix 6.1: What Explains the Slope of a Yield Curve?

    • Chapter 7: Credit Cards and Debit Cards: Interest Rates in Action

  • 7.1 What Is a Credit Card?
  • 7.2 Why Are Credit Card Rates So High?
  • 7.3 Debit Cards
  • 7.4 Do You Want a Crypto Credit Card? How About a Crypto Debit Card?
  • 7.5 Chapter Summary and Study Questions

    • Chapter 8: Economic Shocks and Economic Stability

  • 8.1 The Business Cycle
  • 8.2 Economic Shock: How an Asset Bubble Can Cause a Recession
  • 8.3 Economic Crisis Examples
  • 8.4 Chapter Summary and Study Questions
  • 8.5 Appendix 8.1: The Aggregate Demand–Aggregate Supply Framework

    • Chapter 9: The Business of Commercial Banking

  • 9.1 What Is a Commercial Bank?
  • 9.2 Analyzing the Balance Sheet of a Commercial Bank
  • 9.3 Asset Transformation and Banks
  • 9.4 Fractional Reserve Banking Principle
  • 9.5 Check Processing and Collection
  • 9.6 Managing a Bank’s Operations
  • 9.7 Chapter Summary and Study Questions

    • Chapter 10: The Commercial Banking Industry

  • 10.1 A Brief History of Commercial Banking
  • 10.2 Features of the Commercial Banking System
  • 10.3 Bank Mergers
  • 10.4 The Birth and Death of Regulation Q
  • 10.5 Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
  • 10.6 Commercial Banking and Investment Banking
  • 10.7 Government-Sponsored Enterprises
  • 10.8 Shadow Banking
  • 10.9 Foreign Banks in the United States
  • 10.10 Chapter Summary and Study Questions
  • 10.11 Appendix 10.1: Profit Maximization and Consumer Surplus

    • Chapter 11: Deposit Insurance

  • 11.1 Events Leading Up to the FDIC’s Creation
  • 11.2 Breaking Down the FDIC
  • 11.3 Bank Examinations: The CAMELS System
  • 11.4 FDIC Insurance Premiums: Risk-Based Premiums
  • 11.5 Resolving Bank Failures: Deposit Payoffs versus Purchase-and-Assumption Transactions
  • 11.6 National Credit Union Administration and Deposit Insurance
  • 11.7 Chapter Summary and Study Questions

    • Chapter 12: The Federal Reserve System

  • 12.1 Origins of the Federal Reserve System
  • 12.2 Designing the Federal Reserve System: Checks and Balances
  • 12.3 Structure of the Federal Reserve System
  • 12.4 Meeting Financial Needs of the Public and Governments
  • 12.5 The Federal Reserve’s Dual Mandate, Independence, and Accountability
  • 12.6 Chapter Summary and Study Questions

    • Chapter 13: The Monetary Base and Money Creation

  • 13.1 The Federal Reserve Banks’ Consolidated Balance Sheet
  • 13.2 The Rise and Fall of Federal Reserve Float
  • 13.3 The Monetary Base
  • 13.4 How Banks Create Money: The Money Multiplier
  • 13.5 Chapter Summary and Study Questions

    • Chapter 14: Monetary Policy

  • 14.1 The Evolution of U.S. Monetary Policy
  • 14.2 Monetary Policy Tools
  • 14.3 The Market for Bank Reserves and the Federal Funds Rate
  • 14.4 Monetary Policy with Limited Reserves: Open Market Operations and the Federal Funds Rate
  • 14.5 Monetary Policy with Ample (Superabundant) Reserves: The Interest-on-Reserve-Balance Rate
  • 14.6 The Federal Reserve’s Stabilization of the Economy: Five Case Studies
  • 14.7 The Margin Requirement and Stock Market Speculation
  • 14.8 Strengths and Weaknesses of Monetary Policy
  • 14.9 Conduct of Monetary Policy: Discretion or Rules
  • 14.10 Chapter Summary and Study Questions

    • Chapter 15: Foreign Exchange Market and International Banking

  • 15.1 The Foreign Exchange Market
  • 15.2 Understanding Currency Quotations
  • 15.3 Hedging and the Foreign Exchange Market
  • 15.4 Speculation and the Foreign Exchange Market
  • 15.5 Exchange Rate Determination
  • 15.6 Forecasting Exchange Rates
  • 15.7 International Banking
  • 15.8 Chapter Summary and Study Questions

    • Chapter 16: Exchange Rate Systems

  • 16.1 Choosing an Exchange Rate System
  • 16.2 Floating Exchange Rates
  • 16.3 Managed Floating Exchange Rates
  • 16.4 Fixed Exchange Rates
  • 16.5 Exchange Rate Systems: Three Case Studies
  • 16.6 Currency Crisis
  • 16.7 Monetary Policy in an Open Economy
  • 16.8 Chapter Summary and Study Questions
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    Robert Carbaugh Central Washington University

    Robert J. Carbaugh (PhD Colorado State University) is Professor of Economics Emeritus at Central Washington University. He has been honored with numerous top teaching awards, including the Excellence in Teaching award at the University of Wisconsin–Eau Claire and the Distinguished Professor of the University Teaching Award at Central Washington University. Bob has also been named Scholar-of-the-Year by the Phi Kappa Phi Honorary Society at Central Washington University. For more than forty years, Bob has taught money and banking, international economics, managerial economics, and both introductory and intermediate levels of microeconomics and macroeconomics. He is the author of numerous articles and textbooks including a market-leading textbook on international economics now in its eighteenth edition.

    Additions & Errata

    1/24/24: Removed Table 9.1 and instead linked out to the source of the table. 

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