Suggested Solutions for Tutorial 1

Suggested Solutions for Tutorial 1 - 1 Suggested Solutions...

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1 Suggested Solutions for Tutorial 1 Please note that following suggested solutions are only very basic points and you need to read the textbook and other reference materials for better understanding. 1. ‘A highly developed and efficient financial system is essential to ongoing economic growth and prosperity.’ Discuss the component parts that form a financial system and the relevance of the above statement. Component parts of a financial system: financial institutions—example: banks, insurance offices, superannuation funds financial instruments—example: shares, term deposits, loans financial markets—money and capital markets, stock market, foreign exchange market Discussion: financial system supports economic transactions encourages savings which provides funds for investment provides a range of investment opportunities provides a range of borrowing alternatives efficient allocation of resources for economic growth regulatory regimes provide strength and stability to a financial system 2. (a) Discuss the role of money in a financial system. money is a financial asset that facilitates financial and economic transactions a medium of exchange—swapped for goods and services a store of value—wealth is held or measured in money terms a standard of deferred payment—used to record indebtedness
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This note was uploaded on 08/30/2011 for the course AFF 1000 taught by Professor Chalmers during the Three '11 term at Monash.

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Suggested Solutions for Tutorial 1 - 1 Suggested Solutions...

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