3. The word “ system” in terms of “financial system”, implies a set of complex and closely connected or interlinked institution, agent practice, market, transactions, claims, and liabilities in the economy. The financial system is concerned about money, credit and finance-the three term are intimately related yet are somewhat different from each other.
4. As men material and money are crucial input in production activities The human capital and physical capital can be brought and developed with money, therefore money, credit and finance are lifeblood of economic system
5. Financial System Financial Institution Financial Markets Financial Instruments Financial Services Regulatory +Intermediaries + Non Intermediaries+ Others Banking + Non banking Organized + Unorganized Primary + Secondary Capital Market Money Market Primary Secondary Short Medium Long Term Term Term
6. Economic development Saving & investment Or capital formation Surplus, spending Economic Units Income Minus (Consumption +own Investment) Surplus or Saving Deficit spending Economic Units Income Minus (Consumption + Investment Deficit or Negative Saving Financial System Relationship between Financial System and Economic Development
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