The financial system plays the key role in the economy by stimulating economic growth, influencing economic performance of the actors, affecting economic welfare. This is achieved by financial infrastructure, in which entities with funds allocate those funds to those who have potentially more
productive ways to invest those funds.

Please explain the following:

Interest rates determination and structure
 Interest rate determination
 The rate of interest
 Interest rate theories: loanable funds theory
 Interest rate theories: liquidity preference theory
 The structure of interest rates
 Term structure of interest rates
 Theories of term structure of interest rates
 Expectations theory
 Liquidity premium theory
 Market segmentation theory
 The preferred habitat theory
 Forward interest rates and yield curve

Answer rating: 100% (QA)

The financial system is important in the economy because it stimulates economic growth influences economic performance of actors and affects economic welfare This is achieved by financial infrastructu... View the full answer