“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? In your answer, make sure to  provide a brief definition of a financial system;  identify the key components of a financial system;  provide a definition of surplus and deficit units;  identify the key surplus and deficit units in the Australian financial system; and  answer above statement by identifying the characteristics of a well-functioning, efficient and developed system

Solutions

Expert Solution

Yes, I agree with this statement that an efficient and developed financial system will be helping in efficiently allocating fund from supplier of funds to the user of the funds and it will helping in appropriate allocation of the credit and ensuring the proper liquidity in the market because a well managed financial system is responsible for generation of appropriate capital for various companies who are operating in the industry and it will be also providing with investment opportunities for various depositors so it can be said to have a lot of financial intermediaries who can analyse the savings from the depositors to the borrowers and hence it will maintain an appropriate amount of liquidity and credit availability to a large number of borrowets.

Financial system is an appropriate system of management of finance in an economy and it will be having various components like investment bankers and commercial bankers as well as it will also include regulatory organisations and other depositories which will be providing and appropriate opportunity of proper investment and proper Borrowing.

Surplus units are those units who have a high amount of income then their requirements and expenditure and they are investing, While, dlDeficit units are those units have a large amount of expenditure than the income and they are borrowing in order to meet with the expenditure so they will be deficit units.

Well functioning financial system will be helpful in generation of appropriate credit opportunity and liquidity to a large number of market participants and it will also ensure proper channelization of resources in the economy so that economy can prosper.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

“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.

When the financial system is functioning well, the economy benefits (and when the financial system is...

When the financial system is functioning well, the economy benefits (and when the financial system is functioning poorly, the economy suffers). Discuss the importance of a well-functioning financial system to employment and economic growth in an economy.

In a well-functioning economy, capital will flow efficiently from those who supply capital to those who...

In a well-functioning economy, capital will flow efficiently from those who supply capital to those who demand it. This transfer of capital can take place in three different ways. Discuss these three different ways

The market for used cars is: a) active and well-functioning because of market institutions that developed...

The market for used cars is: a) active and well-functioning because of market institutions that developed to mitigate adverse selection. b) full of moral hazards that prevent the efficient functioning of the market. c) contains many instances of adverse selection, which prevent it from functioning efficiently. d) exhibit the principal–agent problem that prevent buyers from knowing the quality of the car they want to purchase.

Informal activity is naturally restricted in various ways from ever functioning as efficiently as it could...

Informal activity is naturally restricted in various ways from ever functioning as efficiently as it could were it completely legalized and freed from the restrictions that force the activity into informality. They include: Select one: a. informal production and commerce being subject to less risk because it operates outside the law. b. the lack of formal property rights in the informal sector, due to the fact that productive units do not technically exist and the owners of the property are...

How does a well-functioning financial system increase saving (S)and investment (I), holding constant the budget...

How does a well-functioning financial system increase saving (S) and investment (I), holding constant the budget balance and any capital flows?The best way to think about the above question is to consider what would happen to the economy if S > I, or vice versa. An important assumption is to ignore the budget balance (assume there is no government) or any capital flows (also assume a closed economy), and focus only on the market for loanable funds.

1. The economy of Asgard has a well developed financial system, where resources flow to the...

1. The economy of Asgard has a well developed financial system, where resources flow to the capital investments with the highest marginal product. The economy of Titan has a less developed financial system that excludes some would be investors. A. Which nation would you expect to have a higher level of total factor productivity? Explain. B. Suppose the two economies have the same saving rate, depreciation rate, and rate of technological progress. According to the Solow growth model, how does...

The economy of Asgard has a well developed financial system, where resources flow to the capital...

The economy of Asgard has a well developed financial system, where resources flow to the capital investments with the highest marginal product. The economy of Titan has a less developed financial system that excludes some would be investors. Which nation would you expect to have a higher level of total factor productivity? Explain why. Lastly, Suppose the two economies have the same saving rate, depreciation rate, and rate of technological progress... According to the Solow growth model, how does output...

The economy of Asgard has a well developed financial system, where resources flow to the capital...

The economy of Asgard has a well developed financial system, where resources flow to the capital investments with the highest marginal product. The economy of Titan has a less developed financial system that excludes some would be investors. Which nation would you expect to have a higher level of total factor productivity? Explain. Suppose the two economies have the same saving rate, depreciation rate, and rate of technological progress. According to the Solow growth model, how does output per worker,...

Subjects