The Financial System

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The Securities and Exchange Commission (SEC) in the United States financial system is a regulatory body that monitors the financial system, exchange, and securities market. Securities are types of financial instruments created in financial markets.

The Five Parts to the Financial System

The Five Parts to the Financial System

1. Money

Money is used as a medium to buy goods & services. It also is a standard unit of measurement and acts as a store of value.  However, money may not be a good store of value since it loses value with inflation.

2. Financial Instruments

Financial Instruments are formal obligations that entitle one party to receive payments or a share of assets from another party. Examples of tradable financial instruments include loans, stocks, bonds.

3. Financial Markets

Financial Market is a place or network where financial instruments can be sold quickly & cheaply.

4. Financial Institutions

Financial Institutions are firms that connect borrowers and lenders, provide savers and borrowers access to financial instruments & markets. There are two types of Financial Markets – the primary market and the secondary market.

5. Central Banks

Central Banks are large financial institutions that handle government finances, they regulate the supply of money, and they serve as banks to commercial banks.

Prateek Agarwal
Prateek Agarwal
Member since June 20, 2011
Prateek Agarwal’s passion for economics began during his undergrad career at USC, where he studied economics and business. He started Intelligent Economist in 2011 as a way of teaching current and fellow students about the intricacies of the subject. Since then he has researched the field extensively and has published over 200 articles.

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