1. Explain the meaning of surplus units and deficit units. Provide an example of each.
Which types of financial institutions do you deal with? Explain whether you are
acting as a surplus unit or a deficit unit in your relationship with each financial
institution.
Surplus units supply funds to the financial markets. Deficit units obtain funds from the
financial markets. A surplus unit could be a commercial bank and a deficit unit could be
a person taking out a loan for college. I deal with commercial banks and I have a savings
account which makes me a surplus unit.
2. Distinguish between primary and secondary markets. Distinguish between money
