The book is organized to provide the student with an understanding of the process of liquidity creation. First we consider the organization of securities markets. We discuss arbitrage, market makers, exchanges, and settlement procedures as methods of making securities markets more liquid. However, investors need to have money available to them as an alternative to settlement in securities if they are to maintain confidence in the liquidity of the system. It is this consideration that motivates our discussion of money. We show how creation of a monetary standard and settlement in money has costs and how these costs are spread throughout the economy. The banking system exists to reduce the cost of settling transactions in money.Each chapter includes boxed applications that illustrate themes in the text discussion. Overall, the text includes more than 60 boxes, ranging from the impact of leverage on management control to the Panamanian banking crisis, the effect of shorter check clearing times, and the junk bond market in chaos. Key terms in the text discussion are printed in boldface; they are also listed at the end of the chapter to facilitate student review and then are formally defined in the glossary at the end of the text. The chapter ends with a brief conclusion, the list of key terms, and ten to fifteen exercises designed to encourage analytical thinking. Further readings of special interest to students arc also included. An unusual end-of-text feature is full solutions to half the text questions. These solutions, which can be found after Chapter 21, often expand on the topic under consideration.