Financial Markets

Financial Markets

What you learn in the topic:
  Financial Products – Shares
  Financial intermediaries – banks
  Reserve Bank of Australia
  Interest rates (cash rates)
  Australian Securities Exchange (ASX)
  Exchange rate
  Non-financial intermediaries - Insurance comp
  Money supply

The Role of the Financial Markets
  Financial markets perform the essential economic function of channelling funds from those with excess funds (savers), to those who have a shortage of funds (lenders).
  Financial intermediaries are firms that receive the accumulated funds of savers, and then make loans out to lenders.

Sources of saving
  The proportion of household income not consumed on goods and services. Y = C+S
  Profits retained by business. Generally private firms.
  Government budget surpluses.
  Funds from overseas lenders.

Reasons for borrowing
  Consumer borrow to pay fro excess consumption or finance large purchases such as a house or car.
  Business borrow to finacne expansion.
  Government borrow to finance a budget deficit.
  Australian financial institutions lend money to overseas borrowers.

Factor Market for capital
  Capital (Money capital is required by businesses as an input into the production process to make good and services.
  Savings from various sectores is not only used for futures consumption, but also to invest in captal, which increase the productive capacity of the economy .

The Financial Sector
  Consists of a wide frange of financial institutions.
  Employs around 400,000 people.
  Provides may different services including; Mortgages, credit cards, personal loans, superannuation, insurance and investment advice.
  It contributed $130 billion to GDP (gross domestic product) 2010-2011. E.g. mining and tourism

Primary Financial Markets
  Is where financial securities such as debt, shares,...