ECO349H5 Lecture Notes - Lecture 3: Consumption Smoothing, Merino, Disintermediation
Document Summary
Lecture #3 - overview of the financial system. Transactions have declined in cash and increased in debit and credit substantially between. The financial system allows economic agents to trade claims to resources across time. The constants are the things the systems are supposed to do. We can borrow or lend to shift consumption across periods, finance an investment, or share risk (insurance, or hedging) Financial markets typically channel funds from economic players that have surplus funds to those who have a shortage. Demand for supplying or demanding money depends on the price (interest) Agent may long some assets (i. e. insurance) and short some assets (i. e. Agent may long some assets (i. e. insurance) and short some assets (i. e. loan) They provide payment and settlement systems and accounting services. Overall, financial systems play a very important role in the economy. Finances government deficits (i. e. kings used to finance wars)
