ECS3701 ASSIGNMENT 2 ( CORRECT ANSWERS ) SEMESTER 2 DUE 27th SEPTEMBER 2024 GUARANTED DISTINCTION .
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Course
Monetary Economics
Institution
University Of South Africa
. 2.01 Discuss how collateral and indirect finance are used in explaining the basic facts about financial structure around the world. [10] 2.02 The two ways in which government can finance its deficit is through monetizing the debt and printing money. Explain each of these two ways in detail and wh...
ECS3701 ASSIGNMENT 2 (
CORRECT ANSWERS )
th
SEMESTER 2 DUE 27
SEPTEMBER 2024 GUARANTED
DISTINCTION .
Discuss how collateral and indirect finance are used in explaining the basic facts about
financial structure around the world. [10]
Collateral and Indirect Finance in Financial Structure
Collateral and indirect finance are essential components in explaining the basic facts about
financial structure worldwide.
Collateral
Definition: Collateral refers to assets that borrowers pledge as security for a loan. If the
borrower defaults, the lender can seize the collateral to recoup the loan amount.
, 2.01 Discuss how collateral and indirect finance are used in explaining the basic facts about
financial structure around the world. [10]
Collateral and Indirect Finance in Financial Structure
Collateral and indirect finance are essential components in explaining the basic facts about
financial structure worldwide.
Collateral
Definition: Collateral refers to assets that borrowers pledge as security for a loan. If the
borrower defaults, the lender can seize the collateral to recoup the loan amount.
Role in Financial Structure: Collateral plays a crucial role in facilitating lending by
reducing the lender's risk. It allows borrowers with limited creditworthiness to access
funds by providing security to lenders.
Indirect Finance
Definition: Indirect finance involves the use of financial intermediaries, such as banks, to
channel funds from savers to borrowers. Savers deposit funds with intermediaries, which
are then lent out to borrowers.
Role in Financial Structure: Indirect finance is a prevalent method of financing
worldwide. It allows for the efficient allocation of funds by pooling savings from
numerous individuals and providing loans to businesses and individuals.
Basic Facts about Financial Structure
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