what is the importance of the financial instruments in an economy?
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Stock- It enables companies to raise money thru sharing equity and it enables the public to participate in the well being and management of a company.\n\nBond- It enables companies to raise money thru borrowing money and it enables the public to buy debt instruments at a better yield than US Government bonds.\n\nOption- It enables the buyer to participate in the price move of an underlying security for a smaller entry cost than buying the security itself. It enables the seller to generate slight income from an otherwise static position.\n\nFuture- It enables suppliers to lock in sales prices of commodities at some future date...turning a variable revenue into a fixed revenue. It enables buyers to lock in a price paid at some future date...turning a variable expense into a fixed expense.\n\nEssentially financial instruments enable the transfer of capital and risk to occur.
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"The financial sector mobilizes savings and allocates\ncredit across space and time. It provides not only payment services, but more importantly products which enable firms and households to cope with economic uncertainties by hedging, pooling, sharing, and pricing risks. An efficient financial sector reduces the cost and risk of producing and trading goods and services and thus makes an important contribution to raising standards of living."\n\nSo there - in short - if we didn't have one - we would have to work in real money (ie no loans) which could prevent us (or businesses) from investing in projects until the money was saved...\n\nAlso the whole insurance market wouldn't exist which could have devastating consequences for households and businesses.
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C.\n\nThe risk will determine how much is too much risk.  If the firm is cyclic, then the amount of debt should be lower so that the firm can still make interest payment during the down times.\n\nThe tax structure determines the amount of tax shield and also factors into the optimal capital structure.  More tax means more debt.\n\nEdit: By the way, Mark, I've gone through your papers a few years back and they were rather interesting.  I would have sent an email, but you don't have your up here on Answers and I didn't really want to invade your privacy by going through other channels.
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this url gives a synopsis of a political economy analysis - which should help you get an idea of what is required when writing a typical one\n\nhttp://www.cepr.org/pubs/new-dps/dplist.asp?dpno=1225
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Currency is money. It means how much money is worth.
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Sales estimates, inventory levels, raw material prices, interest rates, labor availability & costs.\n\nLots of stuff to consider.
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finance, theory and practice of conducting large public and private dealings in money. Important institutions of private finance include those that deal with insurance, banking, stocks (see stock), bonds, and other securities. With the development of the national state, public finance—the management of the revenues, expenditures, and debts of the state—has been of great political, as well as economic, importance. The most important source of government revenue is taxes, but sale of public properties and franchises, as well as the sale of interest-bearing bonds, also contribute. Since the Korean War, a large part of governmental expenditures has gone for various military and defense needs. Other important areas of governmental expenditure are health, education, and welfare (the Social Security, Medicare, and Medicaid programs); interest on the national debt; and public works. Important institutions of international finance are the International Bank for Reconstruction and Development and the International Monetary Fund.
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This might be of value\nhttp://www.yourdictionary.com/business_profile/debt/business/finance-job.html\n\nfollowing might have some interesting data.\nhttp://www.mises.org/humanaction/pdf/ha_31.pdf
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yes it has a great effect in macro economics dealing with exchange rates and interest rates and foreign trade. a weak or undervalued currency is better for manufacture of goods in your country and a strong currency is better if you import goods from other countries.
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Yahoo Answers is not an ideal forum for your question as trading in Financial Instruments as mentioned in your query is restricted to a very few Genuine Private players in the market who are at the very top of the Pyramid in this particular field; based out of Singapore, Hong Kong and Dubai and they prefer not to  advertise. But if you do have any further queries you may please contact me at touchwoodlimited@gmail.com. (touchwoodlimited at gmail dot com)
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It depends on the interest rates, what instruments of investment your using and the apr rates.
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Yes.  Interest rates, taxes (on gasoline or foreign goods, for example), tax cuts, treasury buybacks, central bank dealings in foreign currency and gold, etc.  The politicians have a lot of tools.  Better to get a book on macroeconomics and read to your heart's content.
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Economics - called the dismal science - studies scarcity of resources on a macro level.  Specific occurrences on a micro level, how an efficient plant operates for example.  Resources have to be managed effectively or they are wasted.  This also includes money.  \n\nSupply and demand is at the core of economics I believe.  Price versus quantity help individual companies decide how much to produce and at what price.  This also includes borrowing which is a staple of capitalism and society, expensive money is expressed in high interest rates.\n\nAs for your other question about the importance of the economy now as opposed to years ago, I don't think so.  It's always been important - the Roman Empire had to deal with inflation.  We just have different circumstances and are much more entwined with other economies.
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Smaller businesses are crucial to the health of the economy.  They employ more people than the large businesses. The people that own and operate small businesses invest a lot of time, talent, and resources to make it a success. They don't always get a lot of publicity, like the large companies do.\n\nThey provide goods and services to the marketplace and they buy goods and services that they need to run the business. They and their employees pay taxes.
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You use money to buy goods and meet your every day needs, but it's just paper. Why do you accept supposedly worthless paper?\n\nNo, understanding the economy  was always equally important. Time does not change that. Farmers in a agrarian economy ( 200 years back ) need to understand deman and supply so that they know what stuff they plant gives them maximum returns. That hasn't changed now has it?
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Money is not a need. \n\nMoney is a convenient way to conduct transactions for commodities and services.
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Why is money so important? I believe it is an idea based on the barter system which allows two people to trade goods or services for other goods and services. But now instead of directly trading for goods and services we have invented something called money which is just a medium to acquiring other goods and services doing a service usually called a job. Now you see if you don't have any money you can not obtain goods such as food or clothing or shelter which will eventually lead to death. So the true reason money is so vital would be survival.