As we will see, the operation of the financial system and the performance of the economy are influenced by policy makers. Individuals elect many of these policy makers in the United States, such as the president and members of Congress. Since these elected officials have the power to alter the financial system by creating laws, and since their decisions can influence economic activity, it is important that individuals be informed when making political and economic choices. Do you want a balanced budget, lower taxes, free international trade, low inflation, and full employment?
Whatever your financial and economic goals may be, you need to be an informed participant if you wish to make a difference. Every individual should attain a basic understanding of finance as it applies to the financial system. It focuses on understanding the roles of financial institutions and markets and how the financial system works. An understanding of finance should help you better understand how the institution, government unit, or business that you work for finances its operations.
At a personal level, the understanding of investments will enable you to better manage your financial resources and provide the basis for making sound decisions for accumulating wealth over time. Thus, in addition to understanding finance basics relating to the financial system and the economy, you also need to develop an understanding of the factors that influence interest rates and security prices. The understanding in the characteristics of stocks and bonds and how they are valued, on securities markets and how to make risk versus return investment decisions.