FINS1612 Lecture Notes - Lecture 1: Capital Market, Financial Asset, Life Insurance
Document Summary
Attempt tutorial questions: explain the functions of a financial system. Finance the art and science managing the scarce resource of money/flow of funds. What is money: acts as medium of exchange, represents a store of wealth, facilitates saving, solves the divisibility problem. Surplus = income > expenditure (can invest money to make it grow) Deficit = expenditure > income (needs funding to make up for shortfall) Surplus units pass on money to deficit units, in return for more money (ie. an investment). Financial sector (heart pumping money throughout the economic body: links deficit units with surplus units, ensures that deficit units pay back surplus units, pumps money to all sectors of the economy. Sectorial flow of funds: the flow of funds between businesses, financial institutions, government and household sectors and the rest of the world, net borrowing and net lending of these sectors of an economy vary between countries.
