L03 Financial Systems

L03 Financial Systems - Financial Systems US Financial...

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    Financial Systems US Financial Markets
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    US Financial Systems  The  financial system in the US   consists of institutions that help to  match one’s saving with another’s  investment. It moves the economy’s scarce  resources from savers to borrowers.
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    US Financial Systems The financial system is made up of financial  institutions that coordinate the actions of  savers and borrowers. Financial institutions can be grouped into  two different categories:  Financial markets   Financial intermediaries
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    The Flow of Funds Diagram Markets Intermediaries Surplus Units (savers) Deficit Units (borrowers)
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    Financial Institutions  in the U.S. Economy Financial markets  are the institutions  through which savers can directly  provide funds to borrowers. Financial intermediaries  are financial  institutions through which savers can  indirectly provide funds to borrowers.
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    US Financial Systems Financial Markets Stock Markets Bond Markets Financial Intermediaries Banks Insurance Companies Pension Funds Mutual Funds
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    Six Key Financial Functions: 1. Transferring Resources Across Time  & Space Student loans; home mortgage,  retirement savings, investment in  China 2. Managing Risk Diversify: Funds and risks bundled  together Long term contracts 3. Clearing and Settling Payments
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    Six Key Financial Functions: 4. Pooling Resources and Subdividing  Shares Creates multiple investor/ownership  opportunities 5. Providing Information The industry provides stock prices  interest rates etc.
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