Explain about the functions of financial systems.

Financial systems perform the necessary economic function of channelling funds through units who have stored surplus funds to units who have a shortage of funds. There the units who have saved can lend funds: they are termed as lender-savers. The units along with a shortage of funds should borrow funds to finance their expenditure: they are the borrower-spenders. Most significant lender-savers are generally households; whereas the classical borrower-spenders are firms and the government.

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