1. What does the financial system comprise in an economy?
2. A household saves more than it invests during a given period; what financial position does it have?
3. Which situation illustrates direct external financing?
What is the financial system?
The set of institutions, markets, instruments, infrastructures, and rules allocating financial resources.
When does an agent have a financing capacity?
When its saving exceeds its investment.
When does an agent have a financing need?
When its investment exceeds its saving.
What is internal financing?
Using an agent's own resources for financing.
What is indirect external financing?
Financing passing through financial institutions.
What is direct external financing?
Connecting borrowers and lenders through securities issuance.
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