33:011:100 Chapter Notes - Chapter 16: System 6, Federal Deposit Insurance Corporation, Wire Transfer

• School: Rutgers University
• Department: Administrative Studies
• Course: 33:011:100
• Professor: Professor Reaves

Document Summary

Financial system: process by which money flows from saver to users. Made up of households, businesses, government, financial institutions, and financial markets. Some individuals and businesses (savers) have incomes greater than expenditures and invest to earn rate of return from their savings. Businesses (users) in need of capital might turn to a lender. Users: spending needs exceed income to create deficit. Funds can be transferred between savers and users in two ways: directly and indirectly. Direct transfer: means that the user raises the needed funds directly from savers. A school district selling bonds to investors. The other way in which funds can be transferred indirectly is through financial institutions. Borrowing from a bank a bank pays depositors interest for the use of their money, and charges borrowers interest. Securities (also called financial instruments): represent obligations on the part of the issuers to provide the purchasers with expected stated returns on the funds invested.