In the money market—sometimes called the financial market—households purchase stocks and bonds from firms.Households supplyfunds to this market in the expectation of earning income in the form of dividends on stocks and interest on bonds. Households also demand (borrow) funds from this market to finance various purchases. Firms borrow to build new facilities in the hope of earning more in the future. The government borrows by issuing bonds.The rest of the world borrows from and lends to the money market.Every morning there are reports on TV and radio about the Japanese and British stock markets. Much of the borrowing and lending of households, firms, the government, and the rest of the world are coordinated by financial institutions—commercial banks, savings and loan associations, insurance companies,and the like.These institutions take deposits from one group and lend them to others. When a firm,a household,or the government borrows to finance a purchase,it has an obligation to pay that loan back, usually at some specified time in the future. Most loans also involve