Financial Institutions-HW Chapter 1-#3
Chapter 1: Questions to help you Study # 3
3) The principal function or role of the global financial system is to move scarce loanable
funds from those who save to those who borrow to buy goods and services and to make
investments in new equipment and facilities so that the global economy can grow and
increase the standard of living enjoyed by its citizens. The financial system determines
both the cost and quantity of funds available in the economy to pay for the thousands of
goods and services we purchase daily. The basic function of the global economic system
is to allocate scarce resources-land, labor, management skill, and capital-to their most
highly valued use, producing the goods and services needed by society. It generates a
flow of production in return for a flow of payments.
