This is a graded discussion: 40 points possible Chapter 1 Discussion At the end

Question

This is a graded discussion: 40 points possible Chapter 1 Discussion At the end of Chapter 1, you should be able to: due Discuss the meaning, use, and importance of money, banking, and financial market This discussion question has several parts. Give each explaination in a complete paragraph form. post is worth up to 30 points. . When responding to the posts of others, pick two different issues (one per student) that you c add significant thought to and address that concept in your post. Each of two responses you make are worth up to 5 points each. . Use definitions and examples to clarify and enhance your answer/comments/discussion I) What is the financial system? identify its six parts and explain any three of them i) identify the five core principles of money and banking and explain any three of them. Critically comment on the postings of any Two students for a total of 10 points (5 points each) Search entries or author Unread Reply

Explanation / Answer

i) The financial system refers to the system that allows the lenders and borrowers to exchange funds among themselves. Financial system is comprised of the borrowing activities as well as the lending activities.

There are six key elements involved in the financial system. Each of them is explained as below:

ii) The five principles of money and banking are-

Markets help in the allocation of scare resources which serves as the factors of production. Since individuals and businesses have unlimited needs and wants, therefore it is mandatory for the markets to regulate the use of resources by setting a price on them. Hence, they play a crucial role in rationing the scare resources. In addition to it, markets in financial sector helps in determination of how funds will be invested.

Information is another crucial principle of the money and banking as it serves as the basis for decision making by the organizations. Incorrect and asymmetric information could result in problems as all the parties involved in the transactions would not have same knowledge. Hence, information should be complete, fair and transparent.

There are risks involved with each decision as it is inevitable. Proper compensation needs to be provided to various entities as per the degree of risks involved in a situation. Opportunities having higher risks would require higher compensation as compared to those involving lower risks.          

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.