study material on finance 26

May 14th, 2015
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Financial system is that part of economy, which includes all the financial inst.

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CHAPTER- 1INTRODUCTIONIntroduction to Financial system:Financial system is that part of economy, which includes all the financial institutions and markets involved in Moving savings from savers to borrowers; and Transferring, sharing & insuring risks. A nation consists of three economic units basically-Government, Industry and HouseholdThese units may perform various activities due to which they may be facing surplus or deficit budgetary situations.Industry: Industry sector may be able to generate funds from their activities and use them for various investment decisions like expansion, diversification, modernization, replacement etc.Government: Government needs fund for financing public expenditure involved is quite high, it generally is in deficit budgetary situation.Individuals: Individual/household sector requires funds for meeting basic necessities as well as for expenditure on luxury items. They however may have been surplus funds in the form of saving.Importance of financial system:Financial system acts as such a channel, which allows funds to move from people, who lack productive investment opportunities (i.e. savers) to those have such opportunities. By doing so the financial system contributes to higher production and efficiency in the economy. It also improves the well-being of consumers by allowing them to time their purchases better. Financial institutions and financial markets are the two Components of financial system. Both of these furth

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