chapter 1 Introduction to Financial Markets and Institutions
distinguish between direct financing and intermediation(indirect financing)
the role of international markets in providing funds to Australian entities
distinguish between primary and secondary markets
an explanation of
funds flows in the economy
the factors which determine saving
the benefits of intermediation
desirable characteristics of financial maekets
how financial markets transfer funds between sectors and entities
the aims, institutions and techniques of financial regulation in Australia
The role of financial markets is to transfer funds from those who wish to lend them to those who need to borrow them
directly
indirectly
The allocation of funds for alternative uses is the key function of the financial system and, in a deregulated environment, interest rates are the major tool used to accomplish this allocation.
functions
saving=income-consumption expenditure
saving-investment expenditure=surplus to be lent to financial system
the source of households
saving
borrowing from other households or financial institutions
the sale of assets
how to use household fund
purchase real assets
lent to other economic units
The household is then said to be a surplus economic unit because it is lending funds to other economic units in the economy.
If the household reduces its holdings of assets or accepts an increased amount of liabilities, it is a deficit economic unit and is a net borrower from the financial system
saving
The life-cycle theory indicates that aggregate saving will depend on the age composition of the population. Thus, all other things being equal, the ageing of our population will lead to a decline in aggregate saving.
A major influence on saving is household income
According to the life-cycle theory of saving, the increasing proportion of retirees in the population will lead to an even theory of saving, the increasing proportion of retirees in the population will lead to an even lower average household savings ratio. It is, therefore, important to ask what can be done to increase the household savings ratio.