Financial system: A complex system - comprises of many different types of financial
institutions and financial markets.
1. Financial markets(Direct Finance)
Savers sell directly to borrowers.
Stock market, Bonds Market, Foreign exchange market (an exchan
Four types of loans
1. A Simple Loan: Pays back the principal and the interest at maturity date.
2. A Fixed-payment Loan: Repayment is made through small payments every month for a set number of
years. This payment includes the principal and the interest
Importance of the flow of funds
1. Helps an economy to function smoothly and grow
2. The flow of savings that come from- household savings, net business savings, government
savings, and net capital inflow (foreign savings), give us Gross savings = domest