Explain the role of the financial system in the macroeconomy.

Consider the following ideas:

• The role of financial assets and the opportunity cost of money.
• The functions of money.
• How banks affect the money supply.
• Interest rates measure the price of money.
• Supply and demand of money determines the interest rate.
• Interactions between borrowers and savers determine the interest rate of loanable funds
• How monetary policy affects the macroeconomy.

Thank you