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In financial systems lenders play a very important part in the flow of funds. Lenders or savers as they are commonly called, can lend their funds in the form of direct finance or indirect finance. Their funds are transported to the borrowers. To properly understand this we must look at diagram A, a diagram of the circular flow of funds in a financial system, on the diagram page.
According to the circular flow diagram, the main savers and source of savings in the economy are households. …
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