ECON 1BB3 Chapter Notes - Chapter 8: Credit Risk, Financial System, Loanable Funds

• School: McMaster University
• Department: Economics
• Course: ECON 1BB3

Document Summary

The financial system consists of those institutions in the economy that matches a persons saving with another person investment. Key things for long-run economic growth is when a country saves a large portion of its gdp, more resources are available for investment in capital and higher capital raises a country"s productivity and living standard. Divided into two groups financial markets and financial intermediaries. Financial system moves the economy"s scare resources from savers to borrowers. Savers supply their money to the financial system with the expectation that they will get back with interest sometime in the future. Borrowers demand money from the financial system knowing that they will be required to pay it back with interest. A number of government regulators oversee theses financial institutions: set rules that guide the operation of a financial system that otherwise operate almost within the private sector.