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In: Finance

“A well-functioning (developed and efficient) financial system will efficiently allocate funds from suppliers of funds (surplus...

“A well-functioning (developed and efficient) financial system will efficiently allocate funds from suppliers of funds (surplus units) to users of funds (deficit units)”. Would you agree with this statement? Include the following in your answer.

- Definition of a financial system

- Key components

- Surplus and deficit units

- Key surplus and deficit units in Australia.

Solutions

Expert Solution

Yes I agree with this statement that a developed and efficient financial system will efficiently

allocate funds from suppliers of funds to user of funds.

Financial system facilitates the flow of funds between deficit and surplus units through the

interaction of financial instruments,institutions and market.

The financial system is the system that allows the transfer of money between savers and borrowers

key components of financial system

1) financial institutions

2) financial markets

3) financial instruments

4) financial services

5) money

Surplus and deficit units :

surplus units are those units who earn more than they spend and deficit units are those units who

spend more money than they received

surplus units provide funds to the financial markets while deficit units obtain funds from the

financial markets

surplus units include households and deficit units include business firm and governments

jeff jeffy answered 1 year ago
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