Question

What are the five parts of the Financial System?

Answer 1

1. Money- Money is used as a means for the purchase of goods & services. It is also a standard measuring unit, and acts as a value store. Money, however, may not be a good value store since it loses value through inflation.

2. Financial Instruments- Financial instruments are formal obligations entitling one party to receive payments or a share of other party 's assets. Examples of the financial instruments tradable include loans, stocks, bonds.

3. Financial Markets- A financial market is a location or network where you can easily and efficiently sell financial instruments.

4. Financial Institutions- Financial institutions are companies that connect borrowers and lenders, and provide access to financial instruments & markets for savers and borrowers. There are two types of Financial Markets – the primary market and the secondary market.

5. Central Banks- Central banks are large financial institutions which handle government finances, regulate money supply, and serve commercial banks as banks.