The whole slide describe about the financial system and the components of financial system. the branches of the financial institutions. And describe about savings, investment, loanable fund market and the economic actions that change the loanable fund market's demand and supply curve, which change the economic structures.

1. Saving, Investment and
the Financial System

2. Financial System
➝ Financial system is the system consist of
some groups/institutions to control the
money transaction and exchange between
investors, lenders and borrowers.
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3. Financial Institutions
Is mainly of two types.
Financial Market
Bond
Market
Stock
Market
Financial
Intermediaries
Insurance
Companies
Banks

4. 4
Financial Market
Market for sell and purchase of shares, bonds, bills , commodities
etc.
Bond Market
Stock Market
Is a financial market that enables investors to buy and sell shares of
publicly traded companies.
Financial market where participants are provided with the issuance
and trading of debt securities.

5. 5
Financial Intermediaries
Is an institution or individual that serve as middleman.
Insurance Companies
Banks
Where people can safely deposit, take loan with interest.
Insurance is a contract, represented by a policy, in which an individual
or entity receives financial protection

6. ➝Private saving
Saving by household
and business.
Private Saving = (Y-T-C)
➝ Public Saving
Government saving.
i.e. (Government Revenue
– Government spending)
Public Saving = (T-G)
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SavingConsists of the amount left over when the cost of a
person's expenditure is subtracted from the amount of
income.

7. Loanable
fund
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Sum total of all the money people and entities in
an economy have decided to save and lend out to
borrowers as an investment rather than use for
personal consumption.

8. 8
Government policies that affect savings and
investment
Taxes and saving
Taxes and investment
Government Budget

9. “
➝Laws that encourage
greater saving
If tax rate is decreased people will save
more.
‡ The supply curve of loanable fund
will shift to right.
‡ That will decrease the equilibrium
interest rate.
‡ Will increase the quantity demand
for loanable fund.
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Saving
Incentive

10. An increase in the supply of loanable funds
10
Demand
0
S’
$1500
S
$1000
4%
3%
Interest
rate
Supply of
loanable funds
Supply
B
A

11. A decrease in the supply of loanable funds
11
Demand
0
S’
$1500
S
$1000
4%
3%
Interest
rate
Supply of
loanable funds
Supply
A
B

12. “
➝Change in the tax
system encourage
investors to invest.
Bring incentive to borrowers.
¤ Shift the demand curve to right.
¤ Increase the demand for loanable
funds.
¤ Increase the interest rate.
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Investment
incentive

13. An increase in the demand of loanable funds
13
Demand
0
D’
$1500
B
$1000
4%
3%
Interest
rate
Supply of
loanable funds
Supply
D
A

14. A decrease in the demand of loanable funds
14
Demand
0
D’
$1500
D
$1000
4%
3%
Interest
rate
Supply of
loanable funds
Supply
A
B

15. “
➝Government spend
more than its tax
revenue.
‡ Shift the supply curve to left.
‡ Increase the equilibrium interest
rate.
‡ Reduces the equilibrium quantity of
loanable funds.
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Budget
Deficit

16. Government Budget Deficit
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Demand
0
S
$1000
D
$800
4%
3%
Interest
rate
Supply of
loanable funds
Supply S’
A
B

17. “
➝Government spend
less than its tax revenue.
‡ Shift the supply curve to right.
‡ Decrease the equilibrium interest
rate.
‡ Increase the equilibrium quantity of
loanable funds.
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Budget
Surplus

18. Government Budget Deficit
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Demand
0
S’
$1000
D
$800
4%
3%
Interest
rate
Supply of
loanable funds
Supply S
B
A

19. Thank You
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