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    Explain The Role of The Financial System and Why It Is Important

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    Mangala Prasetia
    The financial system plays an important role by facilitating the flow of funds between parties, providing mechanisms for transaction settlement, generating and sharing information with investors, enabling risk transfer and management, and addressing incentive problems. An effective financial system is crucial as it allows for efficient allocation of resources in the economy.

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    Explain The Role of The Financial System and Why It Is Important

    Uploaded by

    Mangala Prasetia
    29 views1 page
    The financial system plays an important role by facilitating the flow of funds between parties, providing mechanisms for transaction settlement, generating and sharing information with investors, enabling risk transfer and management, and addressing incentive problems. An effective financial system is crucial as it allows for efficient allocation of resources in the economy.

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    The financial system plays an important role by facilitating the flow of funds between parties, providing mechanisms for transaction settlement, generating and sharing information with investors, enabling risk transfer and management, and addressing incentive problems. An effective financial system is crucial as it allows for efficient allocation of resources in the economy.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    29 views1 page

    Explain The Role of The Financial System and Why It Is Important

    Uploaded by

    Mangala Prasetia
    The financial system plays an important role by facilitating the flow of funds between parties, providing mechanisms for transaction settlement, generating and sharing information with investors, enabling risk transfer and management, and addressing incentive problems. An effective financial system is crucial as it allows for efficient allocation of resources in the economy.

    Copyright:

    © All Rights Reserved
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    Week 1: Overview of financial system

    Explain the role of the financial system and why it is important


    The roles of the financial system are:
    1. To facilitate the flow of funds
    2. To provide the mechanism to settle transactions (payments system e.g. cash, EFTPOS, credit
    card. A strong payments system is efficient in terms of speed, cost, and stability).
    3. To generate and disseminate information
    (provide investors with information useful for decision making)
    4. To provide the means to transfer and manage risk
    5. To provide ways of dealing with incentive problems (e.g. information asymmetry, adverse
    selection, moral hazard, agency problem).
    It is important to have an effective and efficient financial system as this will:

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