Question

7- Why is the financial sector important in more economic debates? Why are more economists concerned with the total amount of flows coming out of retiring to spending?

8- What is money? What is a liquid financial asset? Why do people hold their assets in form of money?

Answer 1

7. In order to possess an healthier economy, financial sector is a mandatory requirement without which the society cannot function in its day to day operations. This sector improves the growth of an economy tremendously by decreasing interest rates where savings decrease and there will be more opportunity for borrowing resulting in an increase of consumer spending. So economists are concerned about retirement cash flows as they tend to spend less and improve savings which could lead to recession at their respective share. But indirect improvement is they offer jobs to young employees which increases productivity thereby improving the economic growth.

8. Money serves as a medium of exchange replacing barter system prevailed in the past. The Fed has various measures to increase the supply of it by printing the currency by certain restrictions in one way and through banks in the other. Liquid financial asset is something which you can easily convert it into cash by maintaining its market value. Examples could be cash, savings accounts, certain investments, etc,. People hold money in the form of money in order to meet their day to day transactions but now-a-days the credit cards have been replaced from holding them, meet their emergency requirement, in order to switch investment or buy investment instantly, etc,.