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Financial system (specific level (regional (the financial system is the…
Financial system
institutions
is primarily to intermediate between those that provide funds and those that need funds, and typically involves transforming and managing risk.
markets
- provide a forum within which financial claims can be traded under established rules of conduct, and can facilitate the management and transformation of risk. They also play an important role in identifying market prices (“price discovery”).
- perform the essential economic function of channeling funds from households, firms, and governments that have saved surplus funds by spending less than their income to those who have a shortage of funds because they wish to spend more than their income.
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specific level
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global
is basically a broader regional system that encompasses all financial institutions, borrowers and lenders within the global economy.
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function
of channeling funds from households, firms, and governments that have saved surplus funds by spending less than their income to those who have a shortage of funds because they wish to spend more than their income.
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They provide funds to people to buy what they need and can eventually afford without forcing them to wait until they have saved up the entire purchase price.
direct finance
borrowers borrow funds directly from lenders in financial markets by selling them securities (also called financial instruments), which are claims on the borrower’s future income or assets.