Graphically Explain the Differences Between the Flow of Funds in an Economy

question 42

Essay

Graphically explain the differences between the flow of funds in an economy without financial intermediaries and the flow of funds in an economy with financial intermediaries.

---

Definitions:

Certificate of Deposit

A savings certificate with a fixed maturity date and specified fixed interest rate that is issued by a bank.

Principal

A primary party to a transaction, such as the chief participant in a business or the main amount of a loan.

Foreign Currency

Currency used in a country other than the one in which it is being considered, which usually requires exchange for use.

Negotiable

Capable of being transferred or sold with ease and typically refers to financial instruments subject to certain conditions.