Definition of Financial Terms

Economics Essay on Interconnectedness within the Financial Structure of an Economy

Interconnectedness within the Financial Structure of an Economy

What financial services do you employ (banks, brokerages, insurance)?

The interconnectedness of an economy’s financial structure highly relates to the process of financial intermediation on different issues of financial exchange existing between financial savers and as channeled directly through a specific financial market or indirectly through involvement of financial intermediaries.

Financial services employed within foregoing case often revolve around pension funds and insurance through engagement of banks as well as other non-monetary intermediary corporations. The provision within a financial intermediation also becomes a very important thing in giving individuals an ideal platform for economic investments and transferring financial risks to third party for insurance cases.

Even though each financial intermediary is responsible for a given role within a financial market in exchange of securities, it is also important to understand that there are circumstances when individuals are multitasked with the above responsibilities. Any array of activities occurring within financial markets that also run borrowing, brokerage and banking to insurance company depends on the interest of sellers and buyers of said securities.

Describe how these services enhance the ability to produce (as a worker or employee) or receive (as a customer) other goods and services.

The implication of financial services on economic performances is highly exhibited by the significance of such services to producers within different industrial sectors and clients who are the consumers of produced products and services. On the producer’s part, offering financial services including loans to companies enhances investment levels and extends the capability to produce goods and services.

By expanding production capacities, it also becomes highly reliable for producing companies to employ more workers at enhanced payments. Increased payments and remuneration basis are motivational factors in production processes undertaken by different employees.

It therefore implies that financial services provision to producing firms and investors would end up in production of multiple outputs to different consumers. Consequently, there would be an increase in the variety of production options made by consumers. Therefore, entire channel puts a given economy at risk of performance and it paves way for the generation of other economic development.

What criteria of discrimination are used when determining which people may (should) receive various services? Why does it matter to the society how savings are used?

The criteria used by different financial institutions to determine the people who are eligible to receive certain financial services include an individual’s payment history and the ability to meet set contract terms. Financial institutions also work on different conditions and must always be keen on choosing a person who is eligible for loans or any other form of financial protection.

Loans are therefore financial securities that can be short or long term depending on terms of agreement. The borrower in such a case must always present his or her payment history as well as financial security for legal pursuit in the event of default. Without terms that are clearly stated on loan repayment, one may also not be in a position to get the services. On issues such as insurance, the insured person must always be in a position to pay a constant premium depending on the insurance policy, failure to which, an insurance company will terminate the contract.

Workers, investors, consumers and employers are some of the stakeholders in any kind of business operation. Individuals therefore create a social environment under which, a particular business operates under, thus it would show interest on financial issues depending on the audit group.

Finance savers must always get a clear response by understanding how well a financial institution responds in utilizing monetary policies to help stabilize the economy. The saved amount of finances should also circulate within the economy and it helps in generating more income.

Diagrams showing interconnectedness





Labor force income



Savings                                               taxes

interests                                          protection



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