Describe the nature of the financial system in a modern economy giving the important types of constituent institutions, markets and instruments. Explain the concept of flow-of-funds in the financial markets

Financial system is a set of inter-related institutions, instruments and markets, which raise (savings) funds and channels them to their efficient use. In other words, financial system comprises of individuals (savers), intermediaries (financial institutions), markets (money and capital markets), and users (borrowers of money). Hence, financial system acts as an intermediary between the savers and users (investors). It provides the principal means by which savings are transformed into investments. It helps produce goods and services, which in turn improves standard of living. There are areas or people with surplus funds and there are those with a deficit. A financial system or financial sector functions as an intermediary and facilitates the flow of funds from the areas of surplus to the areas of deficit. In fact developed financial system __________ _________ ___ ____ _______ ________ _____ ____ _________ ______ ____.
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