Stock Market Terminologies
What is a Financial System?
First, let us get a basic idea of the financial system. In any country, economic resources are limited & scarce, with individuals having unlimited wants & desires. However, it is a challenge for the economy to determine when, where and whom to distribute its resources. Therefore, it resulted in a financial system structure capable of efficiently allocating the economic resources to stimulate growth & prosperity in the economy.
A financial system is a set of economic arrangements where several financial institutions facilitate the transfer of funds between borrowers, investors & lenders. The goal is to distribute economic resources efficiently and effectively to promote growth within the country.
Some Key features of a financial system are:
- It consists of institutions like banks, insurance companies & stock exchanges that permit the exchange of funds between borrowers and lenders.
- It offers investors the ability to grow their wealth & assets.
- It serves as a catalyst that provides opportunities such as providing savings options through banks, bringing liquidity to financial markets through stock exchanges & protecting investors from any financial risk through insurance companies.